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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended August 31, 2005



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission File Number 1-4887



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TEXAS INDUSTRIES, INC.

(Exact name of registrant as specified in the charter)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|Delaware                                                       |  | 75-0832210                       
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



|                                                      |  |           
|----------------------------------------------------- |  | ----------
|1341 West Mockingbird Lane, Suite 700W, Dallas, Texas |  | 75247-6913
|(Address of principal executive offices)              |  | (Zip Code)



Registrants
telephone number, including area code (972) 647-6700



---



Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).    Yes  x    No ̈



Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes ̈No  x



There were 23,001,082 shares of the Registrants Common Stock, $1.00 par value, outstanding as of October 3, 2005.



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INDEX



TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|
|



|                              |  |                                                                                                                          |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                                          |  | Page
|PART I. FINANCIAL INFORMATION |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Financial Statements                                                                                                     |  |     
|                              |  |                                                                                                                         
|                              |  | Consolidated Balance Sheets  August 31, 2005 and May 31, 2005                                                           |  | 3   
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Operations  three months ended August 31, 2005 and August 31, 2004                           |  | 4   
|                              |  |                                                                                                                         
|                              |  | Consolidated Statements of Cash Flows  three months ended August 31, 2005 and August 31, 2004                           |  | 5   
|                              |  |                                                                                                                         
|                              |  | Notes to Consolidated Financial Statements                                                                               |  | 6   
|                              |  |                                                                                                                         
|                              |  | Report of Independent Registered Public Accounting Firm                                                                  |  | 24  
|                              |  |                                                                                                                         
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                    |  | 25  
|                              |  |                                                                                                                         
|Item 3.                       |  | Quantitative and Qualitative Disclosures About Market Risk  the information required by this item is included in Item 2 |  |    
|                              |  |                                                                                                                         
|Item 4.                       |  | Controls and Procedures                                                                                                  |  | 31  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                                         
|                              |  |                                                                                                                         
|Item 1.                       |  | Legal Proceedings                                                                                                        |  | 31  
|                              |  |                                                                                                                         
|Item 6.                       |  | Exhibits                                                                                                                 |  | 31  
|                              | 
|SIGNATURES                    |  |                                                                                                                         



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CONSOLIDATED BALANCE SHEETS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                     |  |                           |         |   |             |   |           |  
|---------------------------------------------------- |  | ------------------------- | ------- | - | ----------- | - | --------- | -
|In thousands                                         |  | (Unaudited)August 31,2005 |         |   | May 31,2005 |  
|ASSETS                                               |  |                           |         |   |             |   |           |  
|CURRENT ASSETS                                       |  |                           |         |   |             |   |           |  
|Cash and cash equivalents                            |  | $                         | 137,503 |   |             | $ | 251,600   |  
|Accounts receivable - net                            |  |                           | 117,817 |   |             |   | 117,363   |  
|Inventories                                          |  |                           | 87,961  |   |             |   | 83,291    |  
|Deferred income taxes and prepaid expenses           |  |                           | 30,072  |   |             |   | 28,754    |  
|                                                     |  |                           |         |   |             |   |           |  
|TOTAL CURRENT ASSETS                                 |  |                           | 373,353 |   |             |   | 481,008   |  
|                                                     |  |                          
|OTHER ASSETS                                         |  |                           |         |   |             |   |           |  
|Goodwill                                             |  |                           | 61,307  |   |             |   | 61,307    |  
|Real estate and investments                          |  |                           | 100,597 |   |             |   | 100,200   |  
|Deferred income taxes, intangibles and other charges |  |                           | 36,805  |   |             |   | 27,571    |  
|Net assets of discontinued operations                |  |                           |        |   |             |   | 836,100   |  
|                                                     |  |                           |         |   |             |   |           |  
|                                                     |  |                           | 198,709 |   |             |   | 1,025,178 |  
|                                                     |  |                          
|PROPERTY, PLANT AND EQUIPMENT                        |  |                           |         |   |             |   |           |  
|Land and land improvements                           |  |                           | 131,784 |   |             |   | 131,911   |  
|Buildings                                            |  |                           | 45,612  |   |             |   | 45,847    |  
|Machinery and equipment                              |  |                           | 681,613 |   |             |   | 682,962   |  
|Construction in progress                             |  |                           | 26,824  |   |             |   | 22,096    |  
|                                                     |  |                           |         |   |             |   |           |  
|                                                     |  |                           | 885,833 |   |             |   | 882,816   |  
|Less depreciation and depletion                      |  |                           | 474,458 |   |             |   | 470,163   |  
|                                                     |  |                           |         |   |             |   |           |  
|                                                     |  |                           | 411,375 |   |             |   | 412,653   |  
|                                                     |  |                           |         |   |             |   |           |  
|                                                     |  | $                         | 983,437 |   |             | $ | 1,918,839 |  
|                                                     |  |                           |         |   |             |   |           |  
|LIABILITIES AND SHAREHOLDERS EQUITY                 |  |                           |         |   |             |   |           |  
|CURRENT LIABILITIES                                  |  |                           |         |   |             |   |           |  
|Accounts payable                                     |  | $                         | 66,396  |   |             | $ | 58,022    |  
|Accrued interest, wages and other items              |  |                           | 31,966  |   |             |   | 49,449    |  
|Current portion of long-term debt                    |  |                           | 687     |   |             |   | 688       |  
|                                                     |  |                           |         |   |             |   |           |  
|TOTAL CURRENT LIABILITIES                            |  |                           | 99,049  |   |             |   | 108,159   |  
|                                                     |  |                          
|LONG-TERM DEBT                                       |  |                           | 252,188 |   |             |   | 603,126   |  
|                                                     |  |                          
|CONVERTIBLE SUBORDINATED DEBENTURES                  |  |                           | 199,937 |   |             |   | 199,937   |  
|                                                     |  |                          
|DEFERRED INCOME TAXES AND OTHER CREDITS              |  |                           | 63,961  |   |             |   | 80,050    |  
|                                                     |  |                          
|SHAREHOLDERS EQUITY                                 |  |                           |         |   |             |   |           |  
|Common stock, $1 par value                           |  |                           | 25,067  |   |             |   | 25,067    |  
|Additional paid-in capital                           |  |                           | 292,126 |   |             |   | 285,313   |  
|Retained earnings                                    |  |                           | 116,775 |   |             |   | 686,476   |  
|Cost of common stock in treasury                     |  |                           | (57,943 | ) |             |   | (61,566   | )
|Pension liability adjustment                         |  |                           | (7,723  | ) |             |   | (7,723    | )
|                                                     |  |                           |         |   |             |   |           |  
|                                                     |  |                           | 368,302 |   |             |   | 927,567   |  
|                                                     |  |                           |         |   |             |   |           |  
|                                                     |  | $                         | 983,437 |   |             | $ | 1,918,839 |  
|                                                     |  |                           |         |   |             |   |           |  



See
notes to consolidated financial statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                              |      |                              |         |      |  |   |         |  
|------------------------------------------------------------- | ---- | ---------------------------- | ------- | ---- |  | - | ------- | -
|In thousands except per share                                 |      | Three months endedAugust 31, |        
|                                                              | 2005 |                              |         | 2004 | 
|NET SALES                                                     |      | $                            | 241,884 |      |  | $ | 209,073 |  
|                                                              |      |                             
|COSTS AND EXPENSES (INCOME)                                   |      |                              |         |      |  |   |         |  
|Cost of products sold                                         |      |                              | 194,221 |      |  |   | 177,618 |  
|Selling, general and administrative                           |      |                              | 23,228  |      |  |   | 19,190  |  
|Interest                                                      |      |                              | 9,264   |      |  |   | 5,130   |  
|Loss on debt retirements and spin-off charges                 |      |                              | 112,284 |      |  |   |        |  
|Other income                                                  |      |                              | (4,141  | )    |  |   | (3,041  | )
|                                                              |      |                              |         |      |  |   |         |  
|                                                              |      |                              | 334,856 |      |  |   | 198,897 |  
|                                                              |      |                              |         |      |  |   |         |  
|INCOME (LOSS) BEFORE INCOME TAXES AND DISCONTINUED OPERATIONS |      |                              | (92,972 | )    |  |   | 10,176  |  
|                                                              |      |                             
|Income taxes (benefit)                                        |      |                              | (32,948 | )    |  |   | 2,649   |  
|                                                              |      |                              |         |      |  |   |         |  
|INCOME (LOSS) FROM CONTINUING OPERATIONS                      |      |                              | (60,024 | )    |  |   | 7,527   |  
|                                                              |      |                             
|Income from discontinued operations  net of income taxes     |      |                              | 8,691   |      |  |   | 28,356  |  
|                                                              |      |                              |         |      |  |   |         |  
|NET INCOME (LOSS)                                             |      | $                            | (51,333 | )    |  | $ | 35,883  |  
|                                                              |      |                              |         |      |  |   |         |  
|Basic earnings (loss) per share                               |      |                              |         |      |  |   |         |  
|Income (loss) from continuing operations                      |      | $                            | (2.63   | )    |  | $ | .35     |  
|Income from discontinued operations                           |      |                              | .38     |      |  |   | 1.33    |  
|                                                              |      |                              |         |      |  |   |         |  
|Net income (loss)                                             |      | $                            | (2.25   | )    |  | $ | 1.68    |  
|                                                              |      |                              |         |      |  |   |         |  
|Diluted earnings (loss) per share                             |      |                              |         |      |  |   |         |  
|Income (loss) from continuing operations                      |      | $                            | (2.63   | )    |  | $ | .34     |  
|Income from discontinued operations                           |      |                              | .38     |      |  |   | 1.28    |  
|                                                              |      |                              |         |      |  |   |         |  
|Net income (loss)                                             |      | $                            | (2.25   | )    |  | $ | 1.62    |  
|                                                              |      |                              |         |      |  |   |         |  
|Average shares outstanding                                    |      |                              |         |      |  |   |         |  
|Basic                                                         |      |                              | 22,822  |      |  |   | 21,356  |  
|Diluted                                                       |      |                              | 22,822  |      |  |   | 22,104  |  
|                                                              |      |                              |         |      |  |   |         |  
|Cash dividends per share                                      |      | $                            | .075    |      |  | $ | .075    |  
|                                                              |      |                              |         |      |  |   |         |  



See notes to consolidated financial
statements.



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(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

TEXAS INDUSTRIES, INC. AND SUBSIDIARIES



|                                                                                           |      |                              |          |      |  |   |         |  
|------------------------------------------------------------------------------------------ | ---- | ---------------------------- | -------- | ---- |  | - | ------- | -
|In thousands                                                                               |      | Three months endedAugust 31, |         
|                                                                                           | 2005 |                              |          | 2004 | 
|CONTINUING OPERATIONS                                                                      |      |                              |          |      |  |   |         |  
|Operating Activities                                                                       |      |                              |          |      |  |   |         |  
|Income (loss) from continuing operations                                                   |      | $                            | (60,024  | )    |  | $ | 7,527   |  
|Adjustments to reconcile income (loss) to cash provided by continuing operating activities |      |                              |          |      |  |   |         |  
|Loss on debt retirements                                                                   |      |                              | 107,001  |      |  |   |        |  
|Gain on asset disposals                                                                    |      |                              | (355     | )    |  |   | (2,059  | )
|Depreciation, depletion and amortization                                                   |      |                              | 11,185   |      |  |   | 11,498  |  
|Deferred income taxes (benefit)                                                            |      |                              | (31,832  | )    |  |   | 4,306   |  
|Other - net                                                                                |      |                              | (161     | )    |  |   | (89     | )
|Changes in operating assets and liabilities                                                |      |                              |          |      |  |   |         |  
|Accounts receivable - net                                                                  |      |                              | 211      |      |  |   | (3,179  | )
|Inventories                                                                                |      |                              | (4,670   | )    |  |   | 6,411   |  
|Prepaid expenses                                                                           |      |                              | (791     | )    |  |   | (837    | )
|Accounts payable and accrued liabilities                                                   |      |                              | (11,198  | )    |  |   | (2,531  | )
|Other credits                                                                              |      |                              | 4,993    |      |  |   | 1,328   |  
|                                                                                           |      |                              |          |      |  |   |         |  
|Cash provided by continuing operating activities                                           |      |                              | 14,359   |      |  |   | 22,375  |  
|                                                                                           |      |                             
|Investing Activities                                                                       |      |                              |          |      |  |   |         |  
|Capital expenditures                                                                       |      |                              | (10,321  | )    |  |   | (5,676  | )
|Proceeds from asset disposals                                                              |      |                              | 817      |      |  |   | 2,135   |  
|Investments in life insurance contracts                                                    |      |                              | (1,028   | )    |  |   | (53,553 | )
|Other - net                                                                                |      |                              | 1,605    |      |  |   | (1,934  | )
|                                                                                           |      |                              |          |      |  |   |         |  
|Cash used for continuing investing activities                                              |      |                              | (8,927   | )    |  |   | (59,028 | )
|                                                                                           |      |                             
|Financing Activities                                                                       |      |                              |          |      |  |   |         |  
|Long-term borrowings                                                                       |      |                              | 250,000  |      |  |   |        |  
|Debt retirements                                                                           |      |                              | (600,009 | )    |  |   | (5      | )
|Debt issuance costs                                                                        |      |                              | (7,051   | )    |  |   |        |  
|Debt retirement costs                                                                      |      |                              | (96,024  | )    |  |   |        |  
|Stock option exercises                                                                     |      |                              | 3,853    |      |  |   | 2,832   |  
|Common dividends paid                                                                      |      |                              | (1,711   | )    |  |   | (1,600  | )
|Other - net                                                                                |      |                              |         |      |  |   | (61     | )
|                                                                                           |      |                              |          |      |  |   |         |  
|Cash provided by (used for) continuing financing activities                                |      |                              | (450,942 | )    |  |   | 1,166   |  
|                                                                                           |      |                              |          |      |  |   |         |  
|Net Cash Used for Continuing Operations                                                    |      |                              | (445,510 | )    |  |   | (35,487 | )
|                                                                                           |      |                             
|DISCONTINUED OPERATIONS                                                                    |      |                              |          |      |  |   |         |  
|Cash provided by (used for) discontinued operating activities                              |      |                              | (6,587   | )    |  |   | 26,223  |  
|Cash used for discontinued investing activities                                            |      |                              | (2,712   | )    |  |   | (3,843  | )
|Cash provided by discontinued financing activities                                         |      |                              | 340,712  |      |  |   |        |  
|                                                                                           |      |                              |          |      |  |   |         |  
|Net Cash Provided by Discontinued Operations                                               |      |                              | 331,413  |      |  |   | 22,380  |  
|                                                                                           |      |                              |          |      |  |   |         |  
|Decrease in Cash and Cash Equivalents                                                      |      |                              | (114,097 | )    |  |   | (13,107 | )
|                                                                                           |      |                             
|Cash and Cash Equivalents at Beginning of Period                                           |      |                              | 251,600  |      |  |   | 133,053 |  
|                                                                                           |      |                              |          |      |  |   |         |  
|Cash and Cash Equivalents at End of Period                                                 |      | $                            | 137,503  |      |  | $ | 119,946 |  
|                                                                                           |      |                              |          |      |  |   |         |  



See notes to consolidated financial
statements.



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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



Texas Industries, Inc. and subsidiaries (unless the context indicates otherwise, collectively, the Company or TXI) is a leading supplier of construction materials. On July 29, 2005, the
Company completed the spin-off of its steel segment in the form of a pro-rata, tax-free dividend to the Companys shareholders of one share of Chaparral Steel Company (Chaparral) common stock for each share of the Companys
stock that was owned on July 20, 2005. The Companys continuing operations produce and sell cement, stone, sand and gravel, ready-mix concrete, expanded shale and clay aggregate, and other products from facilities concentrated in Texas,
Louisiana and California, with several products marketed throughout the United States.



SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The
accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the three-month period ended August 31, 2005, are not necessarily indicative of the results that may be expected for the year ended May 31, 2006. For
further information, refer to the consolidated financial statements and footnotes thereto included in the Companys Annual Report on Form 10-K for the year ended May 31, 2005.



Principles of Consolidation. The consolidated financial statements include the accounts of Texas Industries, Inc. and
all subsidiaries except a subsidiary trust in which the Company has a variable interest but is not the primary beneficiary. As a result of the spin-off of the steel segment the prior period financial statements have been reclassified to present the
steel segment as discontinued operations. See Discontinued Operations footnote on pages 17 and 18.



Estimates. The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts reported. Actual results could differ from those estimates.



Cash and Cash Equivalents. Investments with maturities of less than 90 days when purchased are classified as cash equivalents and consist primarily
of money market funds and investment grade commercial paper issued by major corporations and financial institutions.



Receivables.Management evaluates the ability to collect accounts receivable based on a combination of factors. A reserve for doubtful accounts is
maintained based on the length of time receivables are past due or the status of a customers financial condition. If the Company is aware of a specific customers inability to make required payments, specific amounts are added to the
reserve.



Environmental Liabilities.The Company is
subject to environmental laws and regulations established by federal, state and local authorities, and makes provision for the estimated costs related to compliance when it is probable that a reasonably estimable liability has been incurred.



Legal Contingencies.The Company and its subsidiaries
are defendants in lawsuits which arose in the normal course of business, and make provision for the estimated loss from any claim or legal proceeding when it is probable that a reasonably estimable liability has been incurred.



Long-lived Assets.Management reviews long-lived assets for impairment
whenever changes in circumstances indicate that the carrying amount of the assets may not be recoverable and would record an impairment charge if necessary. Such evaluations compare the carrying amount of an asset to future undiscounted net cash
flows expected to be generated by the asset and are significantly impacted by estimates of future prices for the Companys products, capital needs, economic trends and other factors.



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Property, plant and equipment is recorded at cost. Provisions for depreciation are computed generally
using the straight-line method. Provisions for depletion of mineral deposits are computed on the basis of the estimated quantity of recoverable raw materials. Useful lives for the Companys primary operating facilities range from 10 to 25
years. Maintenance and repairs are charged to expense as incurred.



Goodwill. Management tests goodwill for impairment at least annually by reporting unit. If the carrying amount of the goodwill exceeds its fair value an impairment loss is recognized. In applying a fair-value-based test, estimates
are made of the expected future cash flows to be derived from the reporting unit. Similar to the review for impairment of other long-lived assets, the resulting fair value determination is significantly impacted by estimates of future prices for the
Companys products, capital needs, economic trends and other factors. Goodwill having a carrying value of $61.3 million at both August 31, 2005 and May 31, 2005 resulted from the acquisition of Riverside Cement Company and is
identified with the Companys California cement operations. The fair value of the reporting unit exceeds its carrying value.



Real Estate and Investments.Surplus real estate and real estate acquired for development of high quality industrial, office or multi-use parks
totaled $8.2 million at August 31, 2005 and $9.2 million at May 31, 2005.



Investments are composed primarily of life insurance contracts purchased in connection with certain Company benefit plans. The contracts, recorded at their net cash surrender value, totaled $91.5 million (net of
distributions of $1.3 million) at August 31, 2005 and $89.4 million (net of distributions of $1.3 million) at May 31, 2005. During the August 2004 quarter distributed amounts totaling $51.2 million were repaid.



Deferred Charges and Intangibles.Deferred charges are composed
primarily of debt issuance costs that totaled $12.0 million at August 31, 2005 and $17.3 million at May 31, 2005. The costs are associated with various debt issues and amortized over the term of the related debt.



Intangibles are composed of non-compete agreements and other intangibles with
finite lives being amortized on a straight-line basis over periods of 7 to 15 years. Their carrying value, adjusted for write-offs, totaled $1.7 million (net of accumulated amortization of $2.7 million) at August 31, 2005 and $1.8 million (net
of accumulated amortization of $2.6 million) at May 31, 2005. Amortization expense incurred was $100,000 in both three-month periods ended August 31, 2005 and 2004. Estimated amortization expense for each of the five succeeding years is
$300,000 per year.



Other Credits.Other credits totaled
$61.8 million at August 31, 2005 and $57.8 million at May 31, 2005 are composed primarily of liabilities related to the Companys retirement plans, deferred compensation agreements and asset retirement obligations.



Asset Retirement Obligations.Statement of Financial Accounting
Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations, which applies to legal obligations associated with the retirement of long-lived assets, requires that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The fair value of the liability is added to the carrying amount of the associated asset and this additional carrying amount
is depreciated over the life of the asset. The liability is accreted at the end of each period through a charge to operating expense. If the obligation is settled for other than the carrying amount of the liability, the Company will recognize a gain
or loss on settlement.



The Company incurs legal obligations
for asset retirement as part of its normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures. Determining the amount of an asset retirement liability requires estimating the future cost of
contracting with third parties to perform the obligation. The estimate is significantly impacted by, among other considerations, managements assumptions regarding the scope of the work required, labor costs, inflation rates, market-risk
premiums and closure dates.



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Changes in the Companys asset retirement obligations are as follows:



|                               |  |                              |       |   |      |   |       |  
|------------------------------ |  | ---------------------------- | ----- | - | ---- | - | ----- | -
|                               |  | Three months endedAugust 31, |      
|In thousands                   |  | 2005                         |       |   | 2004 |  
|Balance at beginning of period |  | $                            | 4,655 |   |      | $ | 4,455 |  
|Additions                      |  |                              | 5     |   |      |   |      |  
|Accretion expense              |  |                              | 82    |   |      |   | 77    |  
|Settlements                    |  |                              | (120  | ) |      |   | (90   | )
|                               |  |                              |       |   |      |   |       |  
|Balance at end of period       |  | $                            | 4,622 |   |      | $ | 4,442 |  
|                               |  |                              |       |   |      |   |       |  



Pension Liability
Adjustment.The pension liability adjustment to shareholders equity of $7.7 million (net of tax of $4.2 million) at both August 31, 2005 and May 31, 2005 relates to a defined benefit retirement plan covering approximately 600
employees and retirees of the Companys California cement subsidiary. Comprehensive income or loss consists of net income or loss and the pension liability adjustment to shareholders equity. Comprehensive income (loss) was the same as net
income (loss) for the three-month periods ended August 31, 2005 and 2004.



Net Sales. The Company recognizes sales when title has transferred and products are delivered. The Company includes delivery fees in the amount it bills customers to the extent needed to recover the
Companys cost of freight and delivery. Net sales are presented as revenues including these delivery fees. The following is a summary of net sales by product.



|                       |  |                              |         |      |   |        
|---------------------- |  | ---------------------------- | ------- | ---- | - | -------
|                       |  | Three months endedAugust 31,
|In thousands           |  | 2005                         |         | 2004
|Cement                 |  | $                            | 92,605  |      | $ | 88,935 
|Stone, sand and gravel |  |                              | 32,044  |      |   | 24,082 
|Ready-mix              |  |                              | 69,663  |      |   | 54,464 
|Other products         |  |                              | 26,678  |      |   | 24,465 
|Delivery fees          |  |                              | 20,894  |      |   | 17,127 
|                       |  |                              |         |      |   |        
|                       |  | $                            | 241,884 |      | $ | 209,073
|                       |  |                              |         |      |   |        



Other Income.Other income includes routine sales of surplus operating assets and real estate resulting in gains of $2.2 million and $2.1 million in the three-month periods ended August 31, 2005 and 2004, respectively.



Income Taxes. Accounting for income taxes uses the liability method of
recognizing and classifying deferred income taxes. The Company joins in filing a consolidated return with its subsidiaries. Current and deferred tax expense is allocated among the members of the group based on a stand-alone calculation of the tax of
the individual member.



Earnings Per Share(EPS). Basic EPS is computed by dividing net income by the weighted-average number of common shares outstanding during the period including certain contingently issuable shares.



Contingently issuable shares relate to deferred compensation agreements in
which directors elected to defer annual and meeting fees and vested shares under the Companys former stock awards program. The deferred compensation is denominated in shares of the Companys common stock and issued in accordance with the
terms of the agreement subsequent to retirement or separation from the Company. The shares are considered contingently issuable because the director has an unconditional right to the shares to be issued. Vested stock award shares are issued in the
year in which the employee reaches age 60.



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Diluted EPS adjusts income from continuing operations and the outstanding shares for the dilutive effect
of convertible subordinated debentures, stock options and awards.



Basic and Diluted EPS are calculated as follows:



|                                                             |  |                               |         |   |      |   |       
|------------------------------------------------------------ |  | ----------------------------- | ------- | - | ---- | - | ------
|                                                             |  | Three months ended August 31,
|In thousands except per share                                |  | 2005                          |         |   | 2004
|Basic earnings (loss)                                        |  |                               |         |   |      |   |       
|Income (loss) from continuing operations                     |  | $                             | (60,024 | ) |      | $ | 7,527 
|Income from discontinued operations                          |  |                               | 8,691   |   |      |   | 28,356
|                                                             |  |                               |         |   |      |   |       
|Net income (loss)                                            |  | $                             | (51,333 | ) |      | $ | 35,883
|                                                             |  |                               |         |   |      |   |       
|Diluted earnings (loss)                                      |  |                               |         |   |      |   |       
|Income (loss) from continuing operations                     |  | $                             | (60,024 | ) |      | $ | 7,527 
|Interest on convertible subordinated debentures - net of tax |  |                               |        |   |      |   |      
|                                                             |  |                               |         |   |      |   |       
|Diluted income (loss) from continuing operations             |  |                               | (60,024 | ) |      |   | 7,527 
|Income from discontinued operations                          |  |                               | 8,691   |   |      |   | 28,356
|                                                             |  |                               |         |   |      |   |       
|Diluted income (loss)                                        |  | $                             | (51,333 | ) |      | $ | 35,883
|                                                             |  |                               |         |   |      |   |       
|Shares                                                       |  |                               |         |   |      |   |       
|Weighted-average shares outstanding                          |  |                               | 22,791  |   |      |   | 21,290
|Contingently issuable shares                                 |  |                               | 31      |   |      |   | 66    
|                                                             |  |                               |         |   |      |   |       
|Basic weighted-average shares                                |  |                               | 22,822  |   |      |   | 21,356
|                                                             |  |                              
|Convertible subordinated debentures                          |  |                               |        |   |      |   |      
|Stock option and award dilution                              |  |                               |        |   |      |   | 748   
|                                                             |  |                               |         |   |      |   |       
|Diluted weighted-average shares*                             |  |                               | 22,822  |   |      |   | 22,104
|                                                             |  |                               |         |   |      |   |       
|Basic earnings (loss) per share                              |  |                               |         |   |      |   |       
|Income (loss) from continuing operations                     |  | $                             | (2.63   | ) |      | $ | .35   
|Income from discontinued operations                          |  |                               | .38     |   |      |   | 1.33  
|                                                             |  |                               |         |   |      |   |       
|Net income (loss)                                            |  | $                             | (2.25   | ) |      | $ | 1.68  
|                                                             |  |                               |         |   |      |   |       
|Diluted earnings (loss) per share                            |  |                               |         |   |      |   |       
|Income (loss) from continuing operations                     |  | $                             | (2.63   | ) |      | $ | .34   
|Income from discontinued operations                          |  |                               | .38     |   |      |   | 1.28  
|                                                             |  |                               |         |   |      |   |       
|Net income (loss)                                            |  | $                             | (2.25   | ) |      | $ | 1.62  
|                                                             |  |                               |         |   |      |   |       
|                                                             |  |                               |         |   |      |   |       
|*       Shares excluded due to antidilutive effect           |  |                               |         |   |      |   |       
|                                                             |  |                              
|Convertible subordinated debentures                          |  |                               | 3,897   |   |      |   | 2,888 
|Stock options and awards                                     |  |                               | 928     |   |      |   | 519   



Stock-based
Compensation.The Company accounts for employee stock options using the intrinsic value method of accounting prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees as allowed by Statement of Financial
Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Generally, no expense is recognized related to the Companys stock options because the exercise price of each option is set at the fair
market value of the underlying common stock on the date the option is granted.



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In accordance with SFAS No. 123, the Company discloses the compensation cost based on the estimated
fair value at the date of grant recognizing compensation expense ratably over the vesting period. The fair value of each option grant was estimated on the date of grant for purposes of the pro forma disclosures using the Black-Scholes option-pricing
model. No options were granted in the three-month periods ended August 31, 2005 and 2004.



In addition to grants under its stock option plans, the Company has provided stock-based compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted
stock payments and a former stock awards program. Stock compensation expense related to these grants is included in the determination of net income as reported in the financial statements over the vesting periods of the related grants.



If the Company had applied the fair value recognition provision of SFAS
No. 123, the Companys net income (loss) and earnings (loss) per share would have been adjusted to the following pro forma amounts:



|                                                                                                          |  |                              |         |   |      |   |        |  
|--------------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | - | ---- | - | ------ | -
|                                                                                                          |  | Three months endedAugust 31, |        
|In thousands except per share                                                                             |  | 2005                         |         |   | 2004 |  
|Net income (loss)                                                                                         |  |                              |         |   |      |   |        |  
|As reported                                                                                               |  | $                            | (51,333 | ) |      | $ | 35,883 |  
|Plus: stock-based compensation included in the determination of net income (loss) as reported, net of tax |  |                              | 3,064   |   |      |   | 452    |  
|Less: fair value of stock-based compensation, net of tax                                                  |  |                              | (2,228  | ) |      |   | (1,262 | )
|                                                                                                          |  |                              |         |   |      |   |        |  
|Pro forma                                                                                                 |  | $                            | (50,497 | ) |      | $ | 35,073 |  
|                                                                                                          |  |                              |         |   |      |   |        |  
|Basic earnings (loss) per share                                                                           |  |                              |         |   |      |   |        |  
|As reported                                                                                               |  | $                            | (2.25   | ) |      | $ | 1.68   |  
|Pro forma                                                                                                 |  |                              | (2.21   | ) |      |   | 1.64   |  
|                                                                                                          |  |                             
|Diluted earnings (loss) per share                                                                         |  |                              |         |   |      |   |        |  
|As reported                                                                                               |  | $                            | (2.25   | ) |      | $ | 1.62   |  
|Pro forma                                                                                                 |  |                              | (2.21   | ) |      |   | 1.59   |  



In December 2004, the
Financial Accounting Standards Board issued SFAS No. 123 (revised 2004), Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB Opinion
No. 25. Among other items, SFAS No. 123R eliminates the use of APB Opinion No. 25 and the intrinsic value method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of
equity instruments, based on the grant date fair value of those awards, in the financial statements. The current effective date of SFAS No. 123R is the first fiscal year beginning after June 15, 2005, which will be the first quarter of the
Companys fiscal year ending May 31, 2007. We currently expect to adopt SFAS No. 123R effective June 1, 2006 using the modified prospective method. Under the modified prospective method, compensation cost is
recognized in the financial statements beginning with the effective date, based on the requirements of SFAS No. 123R for all share-based payments granted after that date, and based on the requirements of SFAS No. 123 for all unvested
awards granted prior to the effective date of SFAS No. 123R. Financial information for periods prior to the date of adoption of SFAS No. 123R would not be restated. The Company currently utilizes a standard option pricing model (i.e.,
Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS No. 123R permits entities to continue to use such a model, the standard also permits the use of a lattice model. The Company has not yet
determined which model it will use to measure the fair value of awards of equity instruments to employees upon the adoption of SFAS No. 123R.



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The adoption of SFAS No. 123R will have a significant effect on the Companys future results of
operations. However, it will not have an impact on the Companys consolidated financial position. The impact of SFAS No. 123R on the Companys results of operations can not be predicted at this time, because it will depend on the
number of equity awards granted in the future, as well as the model used to value the awards. However, had the Company adopted the requirements of SFAS No. 123R in prior periods, the impact would have approximated the amounts disclosed in the
table above.



SFAS No. 123R also requires that the
benefits associated with the tax deductions in excess of recognized compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash
flows and increase net financing cash flows in periods after the effective date. These future amounts cannot be estimated because they depend on, among other things, when employees exercise stock options.



Accounting for Changes in Accounting Principles.In May 2005, the
Financial Accounting Standards Board issued SFAS No. 154, Accounting Changes and Error Corrections, which is effective for the Company for reporting changes in accounting principles beginning June 1, 2006. SFAS No. 154
modifies the reporting of a change in accounting principle to require retrospective application to prior periods financial statements, unless explicit transition provisions are provided for in new accounting pronouncements or existing
pronouncements that are in the transition phase when SFAS No. 154 becomes effective.



WORKING CAPITAL



Working capital totaled $274.3 million at August 31, 2005, compared to $372.8 million at May 31, 2005.



Accounts receivable are presented net of allowances for doubtful receivables
of $2.5 million at August 31, 2005 and $2.3 million at May 31, 2005. Provisions for bad debts charged to expense were $300,000 and $100,000 in the three-month periods ended August 31, 2005 and 2004, respectively. Uncollectible
accounts written off amounted to $100,000 and $1.7 million in the three-month periods ended August 31, 2005 and 2004, respectively.



Inventories consist of:



|                           |  |                |        |             |   |       
|-------------------------- |  | -------------- | ------ | ----------- | - | ------
|In thousands               |  | August 31,2005 |        | May 31,2005
|Finished products          |  | $              | 6,106  |             | $ | 6,353 
|Work in process            |  |                | 36,243 |             |   | 34,273
|Raw materials and supplies |  |                | 45,612 |             |   | 42,665
|                           |  |                |        |             |   |       
|                           |  | $              | 87,961 |             | $ | 83,291
|                           |  |                |        |             |   |       



Inventories are stated
at cost (not in excess of market) with approximately 62% of inventories using the last-in, first-out (LIFO) method. If the average cost method (which approximates current replacement cost) had been used, inventory values would have been
higher by $16.9 million at August 31, 2005 and $16.8 million at May 31, 2005.



In November 2004, the Financial Accounting Standards Board issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4, which will become effective for the Company beginning
June 1, 2006. This standard clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be expensed as incurred and not included in overhead. In addition, this standard requires that the
allocation of fixed production overhead costs to inventory be based on the normal capacity of the production facilities. The Company is currently evaluating the potential impact of this standard on its financial position and results of operations.



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Accrued interest, wages and other items consist of:



|                         |  |                |        |             |   |       
|------------------------ |  | -------------- | ------ | ----------- | - | ------
|In thousands             |  | August 31,2005 |        | May 31,2005
|Interest                 |  | $              | 4,813  |             | $ | 8,908 
|Employee compensation    |  |                | 13,462 |             |   | 27,919
|Income taxes             |  |                | 21     |             |   | 2,036 
|Property taxes and other |  |                | 13,670 |             |   | 10,586
|                         |  |                |        |             |   |       
|                         |  | $              | 31,966 |             | $ | 49,449
|                         |  |                |        |             |   |       



LONG-TERM DEBT



Long-term debt is comprised of the
following:



|                                                                             |  |                |         |             |   |        
|---------------------------------------------------------------------------- |  | -------------- | ------- | ----------- | - | -------
|In thousands                                                                 |  | August 31,2005 |         | May 31,2005
|Senior secured revolving credit facility expiring in 2010                    |  | $              |        |             | $ |       
|Senior notes due in 2013, interest rate 7.25%                                |  |                | 250,000 |             |   |       
|Pollution control bonds due through 2007, interest rate 4.88% (75% of prime) |  |                | 2,495   |             |   | 2,495  
|Refinanced debt                                                              |  |                |        |             |   | 600,932
|Other                                                                        |  |                | 380     |             |   | 387    
|                                                                             |  |                |         |             |   |        
|                                                                             |  |                | 252,875 |             |   | 603,814
|Less current maturities                                                      |  |                | 687     |             |   | 688    
|                                                                             |  |                |         |             |   |        
|                                                                             |  | $              | 252,188 |             | $ | 603,126
|                                                                             |  |                |         |             |   |        



Refinancing in
Connection with the Spin-off of Chaparral.In connection with the spin-off of Chaparral in July 2005 (see Discontinued Operations footnote on pages 17 and 18), the Company entered into new financing agreements and purchased the
outstanding $600 million aggregate principal amount of 10.25% senior notes due July 15, 2011 (10.25% Senior Notes). On July 6, 2005, the Company issued $250 million aggregate principal amount of its new 7.25% senior notes due
July 15, 2013 (7.25% Senior Notes) and entered into a new senior secured revolving credit facility. In addition, Chaparral issued $300 million aggregate principal amount of its new 10% senior notes due July 15, 2013
(Chaparral Senior Notes) and entered into a separate new senior secured revolving credit facility. Chaparral used the net proceeds from its note offering and borrowings under its credit facility to pay the Company a dividend of $341.1
million. The Company used the net proceeds from its offering of notes, the dividend paid by Chaparral and existing cash to purchase for cash all of its outstanding $600 million aggregate principal amount of 10.25% Senior Notes. The Company paid a
total of $699.5 million to the holders of the 10.25% Senior Notes, which was comprised of $600 million of principal, $3.6 million of accrued interest and $95.9 million of make-whole premiums and consent fees. In the current quarter, the Company
recorded a charge of $107.0 million related to the early retirement of the 10.25% Senior Notes and old credit facility, consisting of $96.0 million in premiums or consent payments and transaction costs and a write-off of $11.0 million of debt
issuance costs and interest rate swap gains and losses associated with the debt repaid. On July 29, 2005, Chaparral became an independent, public company and the Company no longer has any obligations with respect to Chaparrals long-term
debt. Chaparral is not a guarantor of any of the Companys indebtedness nor is the Company a guarantor of any Chaparral indebtedness.



7.25% Senior Notes.At any time on or prior to July 15, 2009, the Company may redeem the notes at a redemption price equal to the sum of the
principal amount thereof, plus accrued interest and a make-whole premium. On and after July 15, 2009, the Company may redeem the notes at a premium of 103.625% in 2009, 101.813% in 2010 and 100% in 2011 and thereafter. In addition, prior to
July 15, 2008, the Company may redeem up to 35% of the aggregate principal amount of the notes at a redemption price equal to 107.25% of the principal amount thereof, plus accrued interest and liquidated damages, if any, with the net cash
proceeds from certain equity offerings.



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If the Company experiences a change of control, it may be required to offer to purchase the notes at a
purchase price equal to 101% of the principal amount, plus accrued interest.



All of the Companys consolidated subsidiaries have unconditionally guaranteed the 7.25% Senior Notes. The indenture governing the notes contain covenants that will limit the Companys ability and the
ability of its subsidiaries to, among other things, incur additional indebtedness, pay dividends or make other distributions or repurchase or redeem its stock, make investments, sell assets, incur liens, enter into agreements restricting its
subsidiaries ability to pay dividends, enter into transactions with affiliates and consolidate, merge or sell all or substantially all of its assets.



New Senior Secured Revolving Credit Facility.The senior secured revolving credit facility expires in July 2010 and provides up to $200 million of
available borrowings. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit are deducted from the borrowing availability under the facility. At August 31, 2005, $27.1 million of the facility was utilized
to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a margin of 1% to 2%, or at a base rate (which is the higher of the federal funds rate plus 0.5% and the prime rate) plus a margin of up to
1%. The interest rate margins are subject to adjustments based on the Companys leverage ratio. Commitment fees are payable currently at an annual rate of 0.375% on the unused portion of the facility. The Company may terminate the facility at
any time.



All of the Companys consolidated subsidiaries
have guaranteed the Companys obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of the Companys existing and future accounts, inventory, equipment, intellectual
property and other personal property, and in all of the Companys equity interest in present and future domestic subsidiaries and 66% of the equity interest in present and future foreign subsidiaries, if any.



The credit facility contains covenants restricting, among other things,
prepayment or redemption of the Companys new senior notes, distributions, dividends and repurchases of capital stock and other equity interests, acquisitions and investments, indebtedness, liens and affiliate transactions. The Company is
required to comply with certain financial tests and to maintain certain financial ratios, such as leverage and interest coverage ratios. At August 31, 2005, the Company was in compliance with all of its loan covenants.



Other.Maturities of long-term debt for each of the five succeeding
years are $700,000 per year through 2007, $1.1 million for 2008 and none for 2009 and 2010.



Interest was allocated between continuing and discontinued operations based on the historic use of funds derived from long-term borrowings. Total accrued interest for the three-month period ended August 31, 2005
was $14.7 million, of which $5.4 million was allocated to discontinued operations. Total accrued interest for the three-month period ended August 31, 2004 was $17.0 million, of which $11.9 million was allocated to discontinued operations.



The total amount of interest paid during the three-month
period ended August 31, 2005 was $37.2 million, of which $23.1 million was allocated to discontinued operations. The total amount of interest paid during the three-month period ended August 31, 2004 was $33.8 million, of which $24.9
million was allocated to discontinued operations. No interest was capitalized in either of the three-month periods ended August 31, 2005 and 2004.



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CONVERTIBLE SUBORDINATED DEBENTURES



On June 5, 1998, the Company issued $206.2 million aggregate principal
amount of 5.5% convertible subordinated debentures due June 30, 2028 (the Debentures). TXI Capital Trust I (the Trust), a Delaware business trust 100% owned by the Company, issued 4,000,000 of its 5.5% Shared Preference
Redeemable Securities (Preferred Securities) to the public for gross proceeds of $200 million. The combined proceeds from the issuance of the Preferred Securities and the issuance to the Company of the common securities of the Trust were
invested by the Trust in the Debentures. At August 31, 2005, 3,998,744 Preferred Securities representing an undivided beneficial interest in $199.9 million of the $206.1 million aggregate principal amount of Debentures issued were outstanding.



The Debentures are redeemable for cash, at par, plus accrued
and unpaid interest, under certain circumstances relating to federal income tax matters or in whole or in part at the option of the Company. Upon any redemption of the Debentures, a like aggregate liquidation amount of Preferred Securities will be
redeemed. Debentures are convertible at any time prior to the close of business on June 30, 2028, at the option of the holder of the Preferred Securities into shares of the Companys common stock. On July 29, 2005, due to the spin-off
of Chaparral the conversion rate was adjusted from 0.72218 shares to 0.97468 shares of the Companys common stock for each Preferred Security.



Holders of the Preferred Securities are entitled to receive cumulative cash distributions at an annual rate of $2.75 per Preferred Security (equivalent to
a rate of 5.5% per annum of the stated liquidation amount of $50 per Preferred Security). The Company has guaranteed, on a subordinated basis, distributions and other payments due on the Preferred Securities, to the extent the Trust has funds
available therefor and subject to certain other limitations (the Guarantee). The Guarantee, when taken together with the obligations of the Company under the Debentures, the Indenture pursuant to which the Debentures were issued, and the
Amended and Restated Trust Agreement of the Trust (including its obligations to pay costs, fees, expenses, debts and other obligations of the Trust, other than with respect to the Preferred Securities and the common securities of the Trust), provide
a full and unconditional guarantee of amounts due on the Preferred Securities. The Preferred Securities do not have a stated maturity date, although they are subject to mandatory redemption upon maturity of the Debentures on June 30, 2028, or
upon earlier redemption.



SHAREHOLDERS
EQUITY



Common stock consists of:



|                                            |  |                |  |            
|------------------------------------------- |  | -------------- |  | -----------
|In thousands                                |  | August 31,2005 |  | May 31,2005
|Shares authorized                           |  | 40,000         |  | 40,000     
|Shares outstanding                          |  | 22,874         |  | 22,728     
|Shares held in treasury                     |  | 2,193          |  | 2,339      
|Shares reserved for stock options and other |  | 4,016          |  | 4,036      



There are authorized
100,000 shares of Cumulative Preferred Stock, no par value, of which 20,000 shares are designated $5 Cumulative Preferred Stock (Voting), redeemable at $105 per share and entitled to $100 per share upon dissolution. An additional 25,000 shares are
designated Series B Junior Participating Preferred Stock. The Series B Preferred Stock is not redeemable and ranks, with respect to the payment of dividends and the distribution of assets, junior to (i) all other series of the Preferred Stock
unless the terms of any other series shall provide otherwise and (ii) the $5 Cumulative Preferred Stock. Pursuant to a Rights Agreement, in November 1996, the Company distributed a dividend of one preferred share purchase right for each
outstanding share of the Companys Common Stock. Each right entitles the holder to purchase from the Company one two-thousandth of a share of the Series B Junior Participating Preferred Stock at a price of $122.50, subject to adjustment. The
rights will expire on November 1, 2006 unless the date is extended or the rights are earlier redeemed or exchanged by the Company pursuant to the Rights Agreement.



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STOCK-BASED COMPENSATION



Stock Option Plans.The Texas Industries, Inc. 2004 Omnibus Equity Compensation Plan provides that, in addition to
other types of awards, non-qualified and incentive stock options to purchase Common Stock may be granted to directors, officers and key employees at market prices at date of grant. Options become exercisable in installments beginning one year after
date of grant and expire ten years later. In addition, non-qualified and incentive stock options remain outstanding under the Companys 1993 Stock Option Plan.



A summary of option transactions for the three-month period ended August 31, 2005, follows:



|                               |  |                    |   |  |                              |      
|------------------------------ |  | ------------------ | - |  | ---------------------------- | -----
|                               |  | Shares UnderOption |   |  | Weighted-AverageOption Price
|Outstanding at May 31, 2005    |  | 1,736,050          |   |  | $                            | 33.48
|Spin-off share adjustment      |  | 443,629            |   |  |                              |     
|Exercised                      |  | (145,300           | ) |  |                              | 26.52
|Canceled                       |  | (329,910           | ) |  |                              | 32.78
|                               |  |                    |   |  |                              |      
|Outstanding at August 31, 2005 |  | 1,704,469          |   |  | $                            | 25.49
|                               |  |                    |   |  |                              |      
|Exercisable at August 31, 2005 |  | 921,043            |   |  | $                            | 25.11
|                               |  |                    |   |  |                              |      



Non-vested options
held by Chaparrals employees and new directors were cancelled on July 29, 2005 in connection with the spin-off of Chaparral. Options held by the Companys continuing employees and directors and vested options held by Chaparrals
employees and new directors were adjusted based on the closing share prices of the Company and Chaparral on July 29, 2005. Outstanding options expire on various dates to January 11, 2015.



Other Stock-based Compensation.The Company has provided stock-based
compensation to employees and directors under stock appreciation rights contracts, deferred compensation agreements, restricted stock payments and a former stock awards program. At August 31, 2005, outstanding Stock Appreciation Rights totaled
163,978 shares, deferred compensation agreements payable in cash totaled 97,558 shares, deferred compensation agreements payable in common stock totaled 27,594 shares and stock awards totaled 10,020 shares. Total charges under these grants and
restricted stock payments included in selling, general and administrative expense were $4.7 million and $700,000 in the three-month periods ended August 31, 2005 and 2004, respectively.



INCOME TAXES



Federal income taxes for the interim periods ended August 31, 2005 and
August 31, 2004, have been included in the accompanying financial statements on the basis of an estimated annual rate for continuing operations. The estimated annualized rate for continuing operations does not include the tax impact of the loss
on debt retirements and Chaparral spin-off charges. The estimated annualized rate for continuing operations excluding these charges is 29.4% for 2005 compared to 26% for 2004. The estimated effective rate for discontinued operations is 35% for 2005
and 2004, and reflects Chaparrals allocable share of such tax as prescribed in the tax sharing agreement between the Company and Chaparral. The Company made income tax payments of $2.2 million in the three-month period ended August 31,
2005 and no income tax payments in the three-month period ended August 31, 2004.



The American Jobs Creation Act of 2004, among other things, allows a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. The Company is currently
evaluating the impact of the new law on its future taxable income for the applicable years, but does not anticipate a benefit for the current year because of an expected taxable loss for the year.



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LEGAL PROCEEDINGS AND CONTINGENT LIABILITIES



The Company is subject to federal, state and local environmental laws and
regulations concerning, among other matters, air emissions and wastewater discharge. The Company believes it is in substantial compliance with applicable environmental laws and regulations; however, from time to time the Company receives claims from
federal and state environmental regulatory agencies and entities asserting that the Company is or may be in violation of certain environmental laws and regulations. Based on its experience and the information currently available to it, the Company
believes that such claims will not have a material impact on its financial condition or results of operations. Despite the Companys compliance and experience, it is possible that the Company could be held liable for future charges which might
be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery of currently unknown conditions could require additional expenditures by the Company.



The Company and its subsidiaries are defendants in lawsuits which arose in
the normal course of business. In managements judgment the ultimate liability, if any, from such legal proceedings will not have a material effect on the consolidated financial position or results of operations of the Company.



In connection with the Companys spin-off of Chaparral, the Company
entered into a separation and distribution agreement and a tax sharing and indemnification agreement with Chaparral. In these agreements, the Company has indemnified Chaparral against, among other things, any liabilities arising out of the
businesses, assets or liabilities retained by the Company and any taxes imposed on Chaparral in connection with the spin-off that result from the Companys breach of its covenants in the tax sharing and indemnification agreement. Chaparral has
indemnified the Company against, among other things, any liabilities arising out of the businesses, assets or liabilities transferred to Chaparral and any taxes imposed on the Company in connection with the spin-off that result from Chaparrals
breach of its covenants in the tax sharing and indemnification agreement.



The Company and Chaparral have made certain covenants to each other in connection with the spin-off that prohibit the Company and Chaparral from taking certain actions. Pursuant to these covenants: (1) neither
the Company nor Chaparral will liquidate, merge, or consolidate with any other person, sell, exchange, distribute or otherwise dispose of our assets (or those of certain of our subsidiaries) except in the ordinary course of business, or enter into
any substantial negotiations, agreements, or arrangements, or arrangements with respect to any such transaction, during the six months following the distribution date of July 29, 2005; (2) the Company and Chaparral will, for a minimum of
two years after the distribution date, continue the active conduct of the cement or steel business, respectively; (3) neither the Company nor Chaparral will repurchase its stock for two years following the distribution except in certain
circumstances permitted by the IRS; (4) the Company and Chaparral will not take any actions inconsistent with the representations made in the separation and distribution agreement or in connection with the issuance by the Companys tax
counsel of its tax opinion with respect to the spin-off; and (5) the Company and Chaparral will not take or fail to take any other action that would result in any tax being imposed on the spin-off. The Company or Chaparral may take actions
inconsistent with these covenants if it obtains an unqualified opinion of counsel or a private letter ruling from the IRS that such actions will not cause the spin-off to become taxable, except that Chaparral may not, under any circumstances, take
any action described in (1) above.



RETIREMENT PLANS



Approximately 600 employees and
retirees of Riverside Cement Company are covered by a defined benefit pension plan and a postretirement health benefit plan. The amount of the defined benefit pension plan and postretirement health benefit plan expense charged to costs and expenses
in the three-month periods ended August 31, 2005 and 2004, are as follows:



|                                   |  |                 |      |   |                |   |      |      |  |   |      |   |  |   |      |  
|---------------------------------- |  | --------------- | ---- | - | -------------- | - | ---- | ---- |  | - | ---- | - |  | - | ---- | -
|                                   |  | Pension Benefit |      |   | Health Benefit |  
|In thousands                       |  | 2005            |      |   | 2004           |   |      | 2005 |  |   | 2004 |  
|Service cost                       |  | $               | 143  |   |                | $ | 109  |      |  | $ | 27   |   |  | $ | 23   |  
|Interest cost                      |  |                 | 624  |   |                |   | 644  |      |  |   | 86   |   |  |   | 123  |  
|Expected return on plan assets     |  |                 | (691 | ) |                |   | (610 | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost |  |                 |     |   |                |   |     |      |  |   | (211 | ) |  |   | (211 | )
|Amortization of net actuarial loss |  |                 | 264  |   |                |   | 125  |      |  |   | 185  |   |  |   | 226  |  
|                                   |  |                 |      |   |                |   |      |      |  |   |      |   |  |   |      |  
|                                   |  | $               | 340  |   |                | $ | 268  |      |  | $ | 87   |   |  | $ | 161  |  
|                                   |  |                 |      |   |                |   |      |      |  |   |      |   |  |   |      |  



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The Company has a series of financial security plans (FSP) that are non-qualified defined
benefit plans providing retirement and death benefits to substantially all of the Companys executive and key managerial employees. The plans are contributory but not funded.



The amount of FSP benefit expense charged to costs and expenses in the three-month periods ended August 31, 2005 and
2004, are as follows:



|                                  |  |             |     |   |      |   |     |  
|--------------------------------- |  | ----------- | --- | - | ---- | - | --- | -
|                                  |  | FSP Benefit |    
|In thousands                      |  | 2005        |     |   | 2004 |  
|Service cost                      |  | $           | 487 |   |      | $ | 415 |  
|Interest cost                     |  |             | 418 |   |      |   | 347 |  
|Amortization of transition amount |  |             |    |   |      |   | 41  |  
|Participant contributions         |  |             | (83 | ) |      |   | (83 | )
|                                  |  |             |     |   |      |   |     |  
|                                  |  | $           | 822 |   |      | $ | 720 |  
|                                  |  |             |     |   |      |   |     |  



DISCONTINUED OPERATIONS



On December 15, 2004,
the Companys board of directors adopted a plan to spin-off the Companys steel operations, which was completed on July 29, 2005. In anticipation of the spin-off, the Company entered into the following transactions:



The Company formed Chaparral Steel Company as a wholly-owned subsidiary. On
June 25, 2005, the Company contributed to Chaparral all of its subsidiaries engaged in the steel business. On July 6, 2005, the Company contributed or transferred to Chaparral real estate and transportation assets used in the steel
business. Chaparral assumed all liabilities arising out of the steel business and the transferred assets.



At various times the Company settled intercompany indebtedness between and among the Company and its subsidiaries, including its subsidiaries engaged in
the steel business. The Company settled these accounts through offsets, contributions of such indebtedness to the capital of the debtor subsidiaries and other non-cash transfers. By the effective date of the spin-off, the Company had contributed to
the capital of Chaparral and its subsidiaries the net intercompany indebtedness owed to it by Chaparral and its subsidiaries.



On July 6, 2005, the Company issued $250 million principal amount of its 7.25% Senior Notes, entered into a new $200 million senior secured revolving
credit facility with a syndicate of lenders, and terminated its then existing credit facility. The Company received net proceeds from the note offering of $245.0 million. The terms of the new 7.25% Senior Notes and credit facility are more fully
described in the Long-term Debt footnote on pages 12 and 13.



On July 6, 2005, Chaparral issued $300 million principal amount of senior notes and entered into a new $150 million credit facility. Chaparral used the net proceeds from its note offering and borrowings under its
credit facility to pay the Company a dividend of $341.1 million.



On July 6, 2005, the Company used the net proceeds from its offering of notes, the dividend paid by Chaparral and existing cash to purchase for cash all of its outstanding $600 million principal amount of 10.25% Senior Notes. The
Company paid a total of $699.5 million to the holders of the 10.25% Senior Notes, which was comprised of $600 million of principal, $3.6 million of accrued interest and $95.9 million of make-whole premiums and consent fees.



As a consequence of the spin-off:



On July 29, 2005, Chaparral became an independent, public company. The
Company has no further ownership interest in Chaparral or in any steel business, and Chaparral has no ownership interest in the Company. In addition, Chaparral is not a guarantor of any of the Companys indebtedness nor is the Company a
guarantor of any Chaparral indebtedness. The Companys relationship with Chaparral is now governed by a separation and distribution agreement and the ancillary agreements described in that agreement. The terms of the agreements are more fully
described in the Legal Proceedings and Contingent Liabilities note on page 16.



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In the current quarter the Company recorded a loss of $107.0 million related to the early retirement of
the 10.25% Senior Notes and old credit facility and incurred $5.3 million in spin-off related charges.



Summarized financial information for discontinued operations is presented below:



|                                                  |  |            |         |      |   |        
|------------------------------------------------- |  | ---------- | ------- | ---- | - | -------
|                                                  |  | August 31,
|In thousands                                      |  | 2005 (a)   |         | 2004
|Net sales                                         |  | $          | 198,893 |      | $ | 290,781
|Income before income/taxes                        |  |            | 13,384  |      |   | 43,630 
|Income taxes                                      |  |            | 4,693   |      |   | 15,274 
|Income from discontinued operations               |  |            | 8,691   |      |   | 28,356 
|(a)    Includes operations
through July 29, 2005. |  |            |         |      |   |        



The following is a
summary of the assets and liabilities of discontinued operations as of the July 29, 2005 spin-off and prior year-end.



|                                                |  |               |           |   |              |   |          
|----------------------------------------------- |  | ------------- | --------- | - | ------------ | - | ---------
|In thousands                                    |  | July 29, 2005 |           |   | May 31, 2005
|Assets                                          |  |               |           |   |              |   |          
|Current assets                                  |  | $             | 361,863   |   |              | $ | 393,417  
|Property, plant and equipment  net             |  |               | 623,165   |   |              |   | 628,457  
|Goodwill                                        |  |               | 85,167    |   |              |   | 85,167   
|Other assets                                    |  |               | 16,617    |   |              |   | 7,586    
|                                                |  |               |           |   |              |   |          
|                                                |  |               | 1,086,812 |   |              |   | 1,114,627
|Liabilities                                     |  |               |           |   |              |   |          
|Current liabilities                             |  |               | 70,839    |   |              |   | 130,757  
|Long-term debt                                  |  |               | 350,000   |   |              |   |         
|Deferred income taxes and other credits         |  |               | 149,316   |   |              |   | 147,770  
|                                                |  |               |           |   |              |   |          
|                                                |  |               | 570,155   |   |              |   | 278,527  
|                                                |  |               |           |   |              |   |          
|                                                |  |               | 516,657   |   |              |   | 836,100  
|Total distribution charged to retained earnings |  |               | (516,657  | ) |              |   |         
|                                                |  |               |           |   |              |   |          
|Net Assets of Discontinued Operations           |  | $             |          |   |              | $ | 836,100  
|                                                |  |               |           |   |              |   |          



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CONDENSED CONSOLIDATING FINANCIAL INFORMATION



On July 6, 2005, Texas Industries, Inc. (the parent company) issued
$250 million principal amount of its 7.25% Senior Notes. All consolidated subsidiaries of the parent company are 100% owned and excluding its Chaparral subsidiaries and minor subsidiaries without operations or material assets, provide a joint and
several, full and unconditional guarantee of the securities. There are no significant restrictions on the parent companys ability to obtain funds from any of the guarantor subsidiaries in the form of a dividend or loan. Additionally, there are
no significant restrictions on a guarantor subsidiarys ability to obtain funds from the parent company or its direct or indirect subsidiaries.



The following condensed consolidating balance sheets, statements of operations and statements of cash flows are provided for the parent company, all
guarantor subsidiaries and all non-guarantor subsidiaries. The information has been presented as if the parent company accounted for its ownership of the guarantor and non-guarantor subsidiaries using the equity method of accounting.



|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|-------------------------------------------------------- |  | -------------------- | ------- | --------------------- | - | ------- | ------------------------- |  | ------------------ | - |  | ------------ | -------- | - |  | - | -------
|In thousands                                             |  | TexasIndustries,Inc. |         | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | EliminatingEntries |   |  | Consolidated
|Condensed consolidating balance sheet at August 31, 2005 |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|                                                         |  |                      |         |                       |  
|Cash and cash equivalents                                |  | $                    | 137,558 |                       | $ | (55     | )                         |  | $                  |  |  | $            |         |   |  | $ | 137,503
|Accounts receivable - net                                |  |                      |        |                       |   | 117,817 |                           |  |                    |  |  |              |         |   |  |   | 117,817
|Intercompany receivables                                 |  |                      | 1,467   |                       |   | 98,148  |                           |  |                    |  |  |              | (99,615  | ) |  |   |       
|Inventories                                              |  |                      |        |                       |   | 87,961  |                           |  |                    |  |  |              |         |   |  |   | 87,961 
|Deferred income taxes and prepaid expenses               |  |                      | 1,752   |                       |   | 28,320  |                           |  |                    |  |  |              |         |   |  |   | 30,072 
|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|Total current assets                                     |  |                      | 140,777 |                       |   | 332,191 |                           |  |                    |  |  |              | (99,615  | ) |  |   | 373,353
|                                                         |  |                      |         |                       |  
|Goodwill                                                 |  |                      |        |                       |   | 61,307  |                           |  |                    |  |  |              |         |   |  |   | 61,307 
|Real estate and investments                              |  |                      | 91,510  |                       |   | 9,087   |                           |  |                    |  |  |              |         |   |  |   | 100,597
|Deferred income taxes, intangibles and other charges     |  |                      | 54,300  |                       |   | 7,470   |                           |  |                    |  |  |              | (24,965  | ) |  |   | 36,805 
|Net assets of discontinued operations                    |  |                      |        |                       |   |        |                           |  |                    |  |  |              |         |   |  |   |       
|Investment in subsidiaries                               |  |                      | 621,304 |                       |   |        |                           |  |                    |  |  |              | (621,304 | ) |  |   |       
|Long-term intercompany receivables                       |  |                      | 50,000  |                       |   |        |                           |  |                    |  |  |              | (50,000  | ) |  |   |       
|Property, plant and equipment - net                      |  |                      |        |                       |   | 411,375 |                           |  |                    |  |  |              |         |   |  |   | 411,375
|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|Total assets                                             |  | $                    | 957,891 |                       | $ | 821,430 |                           |  | $                  |  |  | $            | (795,884 | ) |  | $ | 983,437
|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|Accounts payable                                         |  | $                    | 645     |                       | $ | 65,751  |                           |  | $                  |  |  | $            |         |   |  | $ | 66,396 
|Intercompany payables                                    |  |                      | 98,148  |                       |   | 1,467   |                           |  |                    |  |  |              | (99,615  | ) |  |   |       
|Accrued interest, wages and other items                  |  |                      | 9,856   |                       |   | 22,110  |                           |  |                    |  |  |              |         |   |  |   | 31,966 
|Current portion of long-term debt                        |  |                      | 687     |                       |   |        |                           |  |                    |  |  |              |         |   |  |   | 687    
|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|Total current liabilities                                |  |                      | 109,336 |                       |   | 89,328  |                           |  |                    |  |  |              | (99,615  | ) |  |   | 99,049 
|                                                         |  |                      |         |                       |  
|Long-term debt                                           |  |                      | 252,188 |                       |   |        |                           |  |                    |  |  |              |         |   |  |   | 252,188
|Convertible subordinated debentures                      |  |                      | 199,937 |                       |   |        |                           |  |                    |  |  |              |         |   |  |   | 199,937
|Long-term intercompany payables                          |  |                      |        |                       |   | 50,000  |                           |  |                    |  |  |              | (50,000  | ) |  |   |       
|Deferred income taxes and other credits                  |  |                      | 28,128  |                       |   | 60,798  |                           |  |                    |  |  |              | (24,965  | ) |  |   | 63,961 
|Shareholders equity                                     |  |                      | 368,302 |                       |   | 621,304 |                           |  |                    |  |  |              | (621,304 | ) |  |   | 368,302
|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        
|Total liabilities and shareholders equity               |  | $                    | 957,891 |                       | $ | 821,430 |                           |  | $                  |  |  | $            | (795,884 | ) |  | $ | 983,437
|                                                         |  |                      |         |                       |   |         |                           |  |                    |   |  |              |          |   |  |   |        



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|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|----------------------------------------------------- |  | -------------------- | --------- | - | --------------------- | - | ------------------------- |  | ------------------ | ------- |  | ------------ | ---------- | - |  | - | ---------
|In thousands                                          |  | TexasIndustries,Inc. |           |   | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |  | EliminatingEntries |         |  | Consolidated
|Condensed consolidating balance sheet at May 31, 2005 |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|                                                      |  |                      |           |   |                      
|Cash and cash equivalents                             |  | $                    | 241,287   |   |                       | $ | 10,313                    |  | $                  |        |  | $            |           |   |  | $ | 251,600  
|Accounts receivable - net                             |  |                      |          |   |                       |   | 117,363                   |  |                    |        |  |              |           |   |  |   | 117,363  
|Intercompany receivables                              |  |                      | 240,978   |   |                       |   | 15,360                    |  |                    |        |  |              | (256,338   | ) |  |   |         
|Inventories                                           |  |                      |          |   |                       |   | 83,291                    |  |                    |        |  |              |           |   |  |   | 83,291   
|Deferred income taxes and prepaid expenses            |  |                      | 698       |   |                       |   | 28,056                    |  |                    |        |  |              |           |   |  |   | 28,754   
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total current assets                                  |  |                      | 482,963   |   |                       |   | 254,383                   |  |                    |        |  |              | (256,338   | ) |  |   | 481,008  
|                                                      |  |                      |           |   |                      
|Goodwill                                              |  |                      |          |   |                       |   | 61,307                    |  |                    |        |  |              |           |   |  |   | 61,307   
|Real estate and investments                           |  |                      |          |   |                       |   | 100,200                   |  |                    |        |  |              |           |   |  |   | 100,200  
|Deferred income taxes, intangibles and other charges  |  |                      | 18,077    |   |                       |   | 10,287                    |  |                    |        |  |              | (793       | ) |  |   | 27,571   
|Net assets of discontinued operations                 |  |                      | (12,891   | ) |                       |   | 489,720                   |  |                    | 359,764 |  |              | (493       | ) |  |   | 836,100  
|Investment in subsidiaries                            |  |                      | 1,221,131 |   |                       |   |                          |  |                    |        |  |              | (1,221,131 | ) |  |   |         
|Long-term intercompany receivables                    |  |                      | 50,000    |   |                       |   |                          |  |                    |        |  |              | (50,000    | ) |  |   |         
|Property, plant and equipment - net                   |  |                      |          |   |                       |   | 412,653                   |  |                    |        |  |              |           |   |  |   | 412,653  
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total assets                                          |  | $                    | 1,759,280 |   |                       | $ | 1,328,550                 |  | $                  | 359,764 |  | $            | (1,528,755 | ) |  | $ | 1,918,839
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Accounts payable                                      |  | $                    | 297       |   |                       | $ | 57,725                    |  | $                  |        |  | $            |           |   |  | $ | 58,022   
|Intercompany payables                                 |  |                      | 15,360    |   |                       |   | 240,978                   |  |                    |        |  |              | (256,338   | ) |  |   |         
|Accrued interest, wages and other items               |  |                      | 11,084    |   |                       |   | 38,365                    |  |                    |        |  |              |           |   |  |   | 49,449   
|Current portion of long-term debt                     |  |                      | 680       |   |                       |   | 8                         |  |                    |        |  |              |           |   |  |   | 688      
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total current liabilities                             |  |                      | 27,421    |   |                       |   | 337,076                   |  |                    |        |  |              | (256,338   | ) |  |   | 108,159  
|                                                      |  |                      |           |   |                      
|Long-term debt                                        |  |                      | 602,747   |   |                       |   | 379                       |  |                    |        |  |              |           |   |  |   | 603,126  
|Convertible subordinated debentures                   |  |                      | 199,937   |   |                       |   |                          |  |                    |        |  |              |           |   |  |   | 199,937  
|Long-term intercompany payables                       |  |                      |          |   |                       |   | 50,000                    |  |                    |        |  |              | (50,000    | ) |  |   |         
|Deferred income taxes and other credits               |  |                      | 1,608     |   |                       |   | 79,235                    |  |                    |        |  |              | (793       | ) |  |   | 80,050   
|Shareholders equity                                  |  |                      | 927,567   |   |                       |   | 861,860                   |  |                    | 359,764 |  |              | (1,221,624 | ) |  |   | 927,567  
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          
|Total liabilities and shareholders equity            |  | $                    | 1,759,280 |   |                       | $ | 1,328,550                 |  | $                  | 359,764 |  | $            | (1,528,755 | ) |  | $ | 1,918,839
|                                                      |  |                      |           |   |                       |   |                           |  |                    |         |  |              |            |   |  |   |          



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|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------- | ------------------------- |  | ------------------ | ------ |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  | EliminatingEntries |        |  | Consolidated |        
|Condensed consolidating statement of operations for three months ended August 31, 2005 | 
|                                                                                       |  |                      |          |   |                      
|Net sales                                                                              |  | $                    |         |   |                       | $ | 241,884 |                           |  | $                  |       |  | $            |        |   |  | $ | 241,884 |  
|Costs and expenses (income)                                                            |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |         |   |                       |   | 194,221 |                           |  |                    |       |  |              |        |   |  |   | 194,221 |  
|Selling, general and administrative                                                    |  |                      | 2,795    |   |                       |   | 20,433  |                           |  |                    |       |  |              |        |   |  |   | 23,228  |  
|Interest                                                                               |  |                      | 9,260    |   |                       |   | 886     |                           |  |                    |       |  |              | (882    | ) |  |   | 9,264   |  
|Loss on debt retirements and spin-off charges                                          |  |                      | 112,284  |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   | 112,284 |  
|Other income                                                                           |  |                      | (1,462   | ) |                       |   | (2,679  | )                         |  |                    |       |  |              |        |   |  |   | (4,141  | )
|Intercompany other income                                                              |  |                      | (882     | ) |                       |   |        |                           |  |                    |       |  |              | 882     |   |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 121,995  |   |                       |   | 212,861 |                           |  |                    |       |  |              |        |   |  |   | 334,856 |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (121,995 | ) |                       |   | 29,023  |                           |  |                    |       |  |              |        |   |  |   | (92,972 | )
|Income taxes (benefit)                                                                 |  |                      | (42,851  | ) |                       |   | 9,903   |                           |  |                    |       |  |              |        |   |  |   | (32,948 | )
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (79,144  | ) |                       |   | 19,120  |                           |  |                    |       |  |              |        |   |  |   | (60,024 | )
|Income from discontinued operations - net of income taxes                              |  |                      |         |   |                       |   | (176    | )                         |  |                    | 8,867  |  |              |        |   |  |   | 8,691   |  
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 27,811   |   |                       |   |        |                           |  |                    |       |  |              | (27,811 | ) |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | (51,333  | ) |                       | $ | 18,944  |                           |  | $                  | 8,867  |  | $            | (27,811 | ) |  | $ | (51,333 | )
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                      
|Condensed consolidating statement of operations for three months ended August 31, 2004 | 
|                                                                                       |  |                      |          |   |                      
|Net sales                                                                              |  | $                    |         |   |                       | $ | 209,073 |                           |  | $                  |       |  | $            |        |   |  | $ | 209,073 |  
|Costs and expenses (income)                                                            |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Cost of products sold                                                                  |  |                      |         |   |                       |   | 177,618 |                           |  |                    |       |  |              |        |   |  |   | 177,618 |  
|Selling, general and administrative                                                    |  |                      | 319      |   |                       |   | 18,871  |                           |  |                    |       |  |              |        |   |  |   | 19,190  |  
|Interest                                                                               |  |                      | 5,005    |   |                       |   | 1,007   |                           |  |                    |       |  |              | (882    | ) |  |   | 5,130   |  
|Loss on debt retirements and spin-off charges                                          |  |                      |         |   |                       |   |        |                           |  |                    |       |  |              |        |   |  |   |        |  
|Other income                                                                           |  |                      | (347     | ) |                       |   | (2,694  | )                         |  |                    |       |  |              |        |   |  |   | (3,041  | )
|Intercompany other income                                                              |  |                      | (882     | ) |                       |   |        |                           |  |                    |       |  |              | 882     |   |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | 4,095    |   |                       |   | 194,802 |                           |  |                    |       |  |              |        |   |  |   | 198,897 |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Income (loss) before the following items                                               |  |                      | (4,095   | ) |                       |   | 14,271  |                           |  |                    |       |  |              |        |   |  |   | 10,176  |  
|Income taxes (benefit)                                                                 |  |                      | (1,433   | ) |                       |   | 4,082   |                           |  |                    |       |  |              |        |   |  |   | 2,649   |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|                                                                                       |  |                      | (2,662   | ) |                       |   | 10,189  |                           |  |                    |       |  |              |        |   |  |   | 7,527   |  
|Income from discontinued operations - net of income taxes                              |  |                      |         |   |                       |   | (262    | )                         |  |                    | 28,621 |  |              | (3      | ) |  |   | 28,356  |  
|Equity in earnings (loss) of subsidiaries                                              |  |                      | 38,545   |   |                       |   |        |                           |  |                    |       |  |              | (38,545 | ) |  |   |        |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  
|Net income (loss)                                                                      |  | $                    | 35,883   |   |                       | $ | 9,927   |                           |  | $                  | 28,621 |  | $            | (38,548 | ) |  | $ | 35,883  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |                    |        |  |              |         |   |  |   |         |  



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|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|-------------------------------------------------------------------------------------- |  | -------------------- | -------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------ | - |  | ------------ | -------- | - |  | - | -------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |          |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |         
|Condensed consolidating statement of cash flows for three months ended August 31, 2005 | 
|                                                                                       |  |                      |          |   |                      
|Continuing Operations                                                                  |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash provided by continuing operating activities                                       |  | $                    | 7,102    |   |                       | $ | (2,469  | )                         |  | $ |                   |   |  | $            | 9,726    |   |  | $ | 14,359   |  
|                                                                                       |  |                      |          |   |                      
|Investing activities                                                                   |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Capital expenditures                                                                   |  |                      |         |   |                       |   | (10,321 | )                         |  |   |                   |   |  |              |         |   |  |   | (10,321  | )
|Proceeds from asset disposals                                                          |  |                      |         |   |                       |   | 817     |                           |  |   |                   |   |  |              |         |   |  |   | 817      |  
|Investments in life insurance contracts                                                |  |                      | (1,028   | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (1,028   | )
|Intercompany investing activities                                                      |  |                      | 341,139  |   |                       |   |        |                           |  |   |                   |   |  |              | (341,139 | ) |  |   |         |  
|Other - net                                                                            |  |                      |         |   |                       |   | 1,605   |                           |  |   |                   |   |  |              |         |   |  |   | 1,605    |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash used for continuing investing activities                                          |  |                      | 340,111  |   |                       |   | (7,899  | )                         |  |   |                   |   |  |              | (341,139 | ) |  |   | (8,927   | )
|                                                                                       |  |                      |          |   |                      
|Financing activities                                                                   |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Long-term borrowings                                                                   |  |                      | 250,000  |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | 250,000  |  
|Debt retirements                                                                       |  |                      | (600,009 | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (600,009 | )
|Debt issuance costs                                                                    |  |                      | (7,051   | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (7,051   | )
|Debt retirement costs                                                                  |  |                      | (96,024  | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (96,024  | )
|Stock option exercises                                                                 |  |                      | 3,853    |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | 3,853    |  
|Common dividends paid                                                                  |  |                      | (1,711   | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (1,711   | )
|Other - net                                                                            |  |                      |         |   |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   |         |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash provided by (used for ) continuing financing activities                           |  |                      | (450,942 | ) |                       |   |        |                           |  |   |                   |   |  |              |         |   |  |   | (450,942 | )
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Net Cash Used for Continuing Operations                                                |  |                      | (103,729 | ) |                       |   | (10,368 | )                         |  |   |                   |   |  |              | (331,413 | ) |  |   | (445,510 | )
|                                                                                       |  |                      |          |   |                      
|Discontinued Operations                                                                |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash provided by (used for) discontinued operating activities                          |  |                      |         |   |                       |   |        |                           |  |   | 3,139              |   |  |              | (9,726   | ) |  |   | (6,587   | )
|Cash used for discontinued investing activities                                        |  |                      |         |   |                       |   |        |                           |  |   | (343,851           | ) |  |              | 341,139  |   |  |   | (2,712   | )
|Cash provided by discontinued financing activities                                     |  |                      |         |   |                       |   |        |                           |  |   | 340,712            |   |  |              |         |   |  |   | 340,712  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Net Cash Provided by Discontinued Operations                                           |  |                      |         |   |                       |   |        |                           |  |   |                   |   |  |              | 331,413  |   |  |   | 331,413  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Decrease in cash and cash equivalents                                                  |  |                      | (103,729 | ) |                       |   | (10,368 | )                         |  |   |                   |   |  |              |         |   |  |   | (114,097 | )
|Cash and cash equivalents at beginning of year                                         |  |                      | 241,287  |   |                       |   | 10,313  |                           |  |   |                   |   |  |              |         |   |  |   | 251,600  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  
|Cash and cash equivalents at end of year                                               |  | $                    | 137,558  |   |                       | $ | (55     | )                         |  | $ |                   |   |  | $            |         |   |  | $ | 137,503  |  
|                                                                                       |  |                      |          |   |                       |   |         |                           |  |   |                    |   |  |              |          |   |  |   |          |  



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|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|-------------------------------------------------------------------------------------- |  | -------------------- | ------- | - | --------------------- | - | ------- | ------------------------- |  | - | ------------------ | - |  | ------------ | ------- | - |  | - | ------- | -
|In thousands                                                                           |  | TexasIndustries,Inc. |         |   | GuarantorSubsidiaries |   |         | Non-GuarantorSubsidiaries |  |   | EliminatingEntries |   |  | Consolidated |        
|Condensed consolidating statement of cash flows for three months ended August 31, 2004 | 
|                                                                                       |  |                      |         |   |                      
|Continuing Operations                                                                  |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Cash provided by continuing operating activities                                       |  | $                    | (17,140 | ) |                       | $ | 61,895  |                           |  | $ |                   |   |  | $            | (22,380 | ) |  | $ | 22,375  |  
|Investing activities                                                                   |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Capital expenditures                                                                   |  |                      |        |   |                       |   | (5,676  | )                         |  |   |                   |   |  |              |        |   |  |   | (5,676  | )
|Proceeds from asset disposals                                                          |  |                      |        |   |                       |   | 2,135   |                           |  |   |                   |   |  |              |        |   |  |   | 2,135   |  
|Investments in life insurance contracts                                                |  |                      |        |   |                       |   | (53,553 | )                         |  |   |                   |   |  |              |        |   |  |   | (53,553 | )
|Intercompany investing activities                                                      |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   |        |  
|Other - net                                                                            |  |                      |        |   |                       |   | (1,934  | )                         |  |   |                   |   |  |              |        |   |  |   | (1,934  | )
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Cash used for continuing investing activities                                          |  |                      |        |   |                       |   | (59,028 | )                         |  |   |                   |   |  |              |        |   |  |   | (59,028 | )
|                                                                                       |  |                      |         |   |                      
|Financing activities                                                                   |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Long-term borrowings                                                                   |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   |        |  
|Debt retirements                                                                       |  |                      |        |   |                       |   | (5      | )                         |  |   |                   |   |  |              |        |   |  |   | (5      | )
|Debt issuance costs                                                                    |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   |        |  
|Debt retirement costs                                                                  |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   |        |  
|Stock option exercises                                                                 |  |                      | 2,832   |   |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   | 2,832   |  
|Common dividends paid                                                                  |  |                      | (1,600  | ) |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   | (1,600  | )
|Other - net                                                                            |  |                      |        |   |                       |   | (61     | )                         |  |   |                   |   |  |              |        |   |  |   | (61     | )
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Cash provided by (used for ) continuing financing activities                           |  |                      | 1,232   |   |                       |   | (66     | )                         |  |   |                   |   |  |              |        |   |  |   | 1,166   |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Net Cash Used for Continuing Operations                                                |  |                      | (15,908 | ) |                       |   | 2,801   |                           |  |   |                   |   |  |              | (22,380 | ) |  |   | (35,487 | )
|                                                                                       |  |                      |         |   |                      
|Discontinued Operations                                                                |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Cash provided by (used for) discontinued operating activities                          |  |                      |        |   |                       |   |        |                           |  |   | 3,843              |   |  |              | 22,380  |   |  |   | 26,223  |  
|Cash used for discontinued investing activities                                        |  |                      |        |   |                       |   |        |                           |  |   | (3,843             | ) |  |              |        |   |  |   | (3,843  | )
|Cash provided by discontinued financing activities                                     |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              |        |   |  |   |        |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Net Cash Provided by Discontinued Operations                                           |  |                      |        |   |                       |   |        |                           |  |   |                   |   |  |              | 22,380  |   |  |   | 22,380  |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Decrease in cash and cash equivalents                                                  |  |                      | (15,908 | ) |                       |   | 2,801   |                           |  |   |                   |   |  |              |        |   |  |   | (13,107 | )
|Cash and cash equivalents at beginning of year                                         |  |                      | 134,813 |   |                       |   | (1,760  | )                         |  |   |                   |   |  |              |        |   |  |   | 133,053 |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  
|Cash and cash equivalents at end of year                                               |  | $                    | 118,905 |   |                       | $ | 1,041   |                           |  | $ |                   |   |  | $            |        |   |  | $ | 119,946 |  
|                                                                                       |  |                      |         |   |                       |   |         |                           |  |   |                    |   |  |              |         |   |  |   |         |  



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EXHIBIT A



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



Board of Directors

Texas Industries, Inc.



We have reviewed the accompanying condensed
consolidated balance sheet of Texas Industries, Inc. and subsidiaries (the Company) as of August 31, 2005, and the related condensed consolidated statements of operations and cash flows for the three-month periods ended August 31, 2005 and
2004. These financial statements are the responsibility of the Companys management.



We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical
procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective
of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.



Based on our review, we are not aware of any material modifications that should be made to the condensed consolidated interim financial statements referred to above for
them to be in conformity with U.S. generally accepted accounting principles.



We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Texas Industries, Inc. and subsidiaries as of May 31, 2005, and the
related consolidated statements of operations, shareholders equity, and cash flows for the year then ended [not presented herein], and in our report dated August 10, 2005, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 31, 2005, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it
has been derived.



/s/ Ernst & Young
LLP



October 5, 2005



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MANAGEMENTS DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



We are a leading supplier of construction materials. On July 29, 2005,
we completed the spin-off of our steel segment in the form of a pro-rata, tax-free dividend to our shareholders of one share of Chaparral Steel Company (Chaparral) common stock for each share of our common stock that was owned on
July 20, 2005. As a result of the spin-off, the operating results of the steel segment prior to the spin-off are presented as discontinued operations. See Notes to Consolidated Financial Statements footnote entitled Discontinued
Operations on pages 17 and 18. Our continuing operations produce and sell cement, stone, sand and gravel, ready-mix concrete, expanded shale and clay aggregate, and other products from facilities concentrated in Texas, Louisiana and
California, with several products marketed throughout the United States.



RESULTS OF OPERATIONS



Three Months ended
August 31, 2005 Compared to Three Months ended August 31, 2004



Net Sales. Construction activity in the Texas and California markets we serve remain solid. We believe market conditions should continue to support the price improvement we have experienced. The following
presents certain sales information regarding our major products.



|                               |  |                              |         |   |      |   |         |  
|------------------------------ |  | ---------------------------- | ------- | - | ---- | - | ------- | -
|                               |  | Three months endedAugust 31, |        
|In thousands except per unit   |  | 2005                         |         |   | 2004 |  
|Sales                          |  |                              |         |   |      |   |         |  
|Cement                         |  | $                            | 110,075 |   |      | $ | 104,357 |  
|Stone, sand and gravel         |  |                              | 41,893  |   |      |   | 32,524  |  
|Ready-mix                      |  |                              | 69,753  |   |      |   | 54,519  |  
|Other products                 |  |                              | 28,748  |   |      |   | 26,009  |  
|Interplant                     |  |                              | (29,479 | ) |      |   | (25,463 | )
|Delivery fees                  |  |                              | 20,894  |   |      |   | 17,127  |  
|                               |  |                              |         |   |      |   |         |  
|Net Sales                      |  | $                            | 241,884 |   |      | $ | 209,073 |  
|                               |  |                              |         |   |      |   |         |  
|Shipments                      |  |                              |         |   |      |   |         |  
|Cement (tons)                  |  |                              | 1,342   |   |      |   | 1,449   |  
|Stone, sand and gravel (tons)  |  |                              | 7,313   |   |      |   | 5,830   |  
|Ready-mix (cubic yards)        |  |                              | 1,041   |   |      |   | 939     |  
|                               |  |                             
|Prices                         |  |                              |         |   |      |   |         |  
|Cement ($/ton)                 |  | $                            | 82.02   |   |      | $ | 71.99   |  
|Stone, sand and gravel ($/ton) |  |                              | 5.73    |   |      |   | 5.58    |  
|Ready-mix ($/cubic yard)       |  |                              | 66.99   |   |      |   | 58.13   |  



Net sales at $241.9
million increased 16% from the prior year period. Total cement sales increased $5.7 million on 14% higher average prices and 7% lower shipments. Unexpected downtime of our north Texas cement plants largest finish mill reduced production of
finished cement and limited shipments. Total aggregate sales increased $9.4 million on 3% higher average prices and 25% higher shipments. Total ready-mix sales increased $15.2 million on 15% higher average prices and 11% higher volume. Aggregate and
ready-mix shipments in the prior year period were impacted by inclement weather.



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Cost of Products Sold. Cost of products sold at $194.2 million increased $16.6 million from the
prior year period on increased aggregate and ready-mix shipments and higher energy costs, particularly the cost of electricity we use in cement production. Energy costs accelerated during the last half of the August 2005 quarter and continue to
remain at high levels. These increases were partially offset by the efficiencies of higher aggregate and ready-mix production levels.



Selling, General and Administrative.Selling, general and administrative expense at $23.2 million increased $4.0 million from the prior year period
primarily as a result of the effect on stock-based compensation accruals of the significant increase in our stock price during the August 2005 quarter.



Interest.Interest expense at $9.3 million increased $4.1 million from the prior year period. In connection with the spin-off of Chaparral, we
entered into new financing agreements and purchased the outstanding $600 million of 10.25% senior notes due July 15, 2011. On July 6, 2005, we issued $250 million of new 7.25% senior notes due July 15, 2013 and entered into a separate
new senior secured revolving credit facility. Interest was allocated between continuing and discontinued operations based on the historic use of funds derived from long-term borrowings. Total accrued interest for the three-month period ended
August 31, 2005 was $14.7 million, of which $5.4 million was allocated to discontinued operations. Total accrued interest for the three-month period ended August 31, 2004 was $17.0 million, of which $11.9 million was allocated to
discontinued operations. We currently estimate our future quarterly interest expense at approximately $8.0 million.



Loss on Debt Retirements and Spin-off Charges.In the August 2005 quarter we recorded a loss of $107.0 million related to the early retirement of
our 10.25% senior notes and old credit facility. This loss consisted of $96.0 million in make-whole premiums and consent payments plus transaction costs and a write-off of $11.0 million of debt issuance costs and interest rate swap gains and losses
associated with the debt repaid. In addition, we incurred $5.3 million in charges for financial, accounting and legal services related to the spin-off of Chaparral.



Other Income.Other income at $4.1 million increased $1.1 million from the prior year due to increased interest
income. Included in other income are routine sales of surplus operating assets and real estate that resulted in gains of $2.2 million and $2.1 million in the three-month periods ended August 21, 2005 and 2004, respectively.



Income Taxes.Federal income taxes for the interim periods ended
August 31, 2005 and 2004 have been included in the accompanying financial statements on the basis of an estimated annual rate for continuing operations. The estimated annualized rate for continuing operations does not include the tax impact of
the loss on debt retirements and Chaparral spin-off charges. The estimated annualized rate for continuing operations excluding these charges is 29.4% for 2005 compared to 26% for 2004. The estimated effective rate for discontinued operations is 35%
for 2005 and 2004, and reflects Chaparrals allocable share of such tax as prescribed in our tax sharing agreement with Chaparral.



The American Jobs Creation Act of 2004, among other things, allows a deduction for income from qualified domestic production activities, which will be
phased in from 2005 through 2010. The Company is currently evaluating the impact of the new law on its future taxable income for the applicable years, but does not anticipate a benefit for the current year because of an expected taxable loss for the
year.



Income from Discontinued Operations  Net of
Income Taxes.As a result of the spin-off of Chaparral, the operating results of our steel segment, including the allocation of certain corporate expenses, have been reclassified and presented as discontinued operations. The August 2005 quarter
includes steel operations through the July 29, 2005 spin-off date.



LIQUIDITY AND CAPITAL RESOURCES



In addition to cash and cash equivalents of $137.5 million at August 31, 2005, our sources of liquidity include cash from operations, borrowings available under our $200 million senior secured revolving credit facility and
distributions available from our investments in life insurance contracts.



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Senior Secured Revolving Credit Facility.We have available a $200 million senior secured
revolving credit facility expiring in July 2010. It includes a $50 million sub-limit for letters of credit. Any outstanding letters of credit are deducted from the borrowing availability under the facility. At August 31, 2005, $27.1 million of
the facility was utilized to support letters of credit. Amounts drawn under the facility bear interest either at the LIBOR rate plus a margin of 1% to 2%, or at a base rate (which is the higher of the federal funds rate plus 0.5% and the prime rate)
plus a margin of up to 1%. The interest rate margins are subject to adjustments based on our leverage ratio. Commitment fees are payable currently at an annual rate of 0.375% on the unused portion of the facility. We may terminate the facility at
any time.



All of our consolidated subsidiaries have guaranteed
our obligations under the credit facility. The credit facility is secured by first priority security interests in all or most of our existing and future accounts, inventory, equipment, intellectual property and other personal property, and in all of
our equity interest in present and future domestic subsidiaries and 66% of the equity interest in present and future foreign subsidiaries, if any.



The credit facility contains covenants restricting, among other things, prepayment or redemption of our new 7.25% senior notes, distributions, dividends
and repurchases of capital stock and other equity interest, acquisitions and investments, indebtedness, liens and affiliate transactions. We are required to comply with certain financial tests and to maintain certain financial ratios, such as
leverage and interest coverage ratios. At August 31, 2005, we were in compliance with all of our loan covenants.



Investments of Life Insurance Contracts.During the August 2004 quarter previous distributions received from our investments in life insurance
contracts in the amount of $51.2 million were repaid. Approximately $50 million of these funds are available for redistribution at our election.



Contractual Obligations.The following is a summary of our estimated future payments under our material contractual obligations as of
August 31, 2005.



|                                        |  |                           |         |      |   |        |  |      |        |           |   |            |  |   |        |  |   |        
|--------------------------------------- |  | ------------------------- | ------- | ---- | - | ------ |  | ---- | ------ | --------- | - | ---------- |  | - | ------ |  | - | -------
|                                        |  | Future Payments by Period
|In thousands                            |  | Total                     |         | 2006 |   | 2007   |  | 2008 |        | 2009-2010 |   | After 2010
|Long-term debt (1)                      |  | $                         | 252,875 |      | $ | 687    |  | $    | 680    |           | $ | 1,135      |  | $ |       |  | $ | 250,373
|Convertible subordinated debentures (2) |  |                           | 199,937 |      |   |       |  |      |       |           |   |           |  |   |       |  |   | 199,937
|Leases (3)                              |  |                           | 62,134  |      |   | 16,109 |  |      | 8,707  |           |   | 8,365      |  |   | 17,551 |  |   | 11,402 
|Asset retirement obligations (4)        |  |                           | 19,530  |      |   | 1,130  |  |      | 491    |           |   | 288        |  |   | 379    |  |   | 17,242 
|Defined benefit plans (5) (6)           |  |                           | 96,893  |      |   | 5,762  |  |      | 2,533  |           |   | 2,641      |  |   | 6,482  |  |   | 79,475 
|                                        |  |                           |         |      |   |        |  |      |        |           |   |            |  |   |        |  |   |        
|                                        |  | $                         | 631,369 |      | $ | 23,688 |  | $    | 12,411 |           | $ | 12,429     |  | $ | 24,412 |  | $ | 558,429
|                                        |  |                           |         |      |   |        |  |      |        |           |   |            |  |   |        |  |   |        



---

|(1) | Our long-term debt is described in Notes to Consolidated Financial Statements footnote entitled  Long-term Debt on pages 12 and 13. Our outstanding letters of credit
issued under the senior secured revolving credit facility only collateralize payment of recorded liabilities.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Our convertible subordinated debentures are described in Notes to Consolidated Financial Statements footnote entitled Convertible Subordinated Debentures on page 14.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | We lease certain mobile and other equipment used in our operations under operating leases that may in the normal course of business be renewed or replaced by subsequent leases.
Future payments under leases exclude mineral rights which are insignificant and are generally required only for products produced.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | We incur legal obligations for asset retirement as part of our normal operations related to land reclamation, plant removal and Resource Conservation and Recovery Act closures.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | We pay benefits under a series of non-qualified defined benefit plans.
|--- | ----------------------------------------------------------------------

|(6) | We pay benefits under a health benefit plan covering approximately 600 employees and retirees of our California cement subsidiary. These employees are also covered by a qualified
defined benefit pension plan. We contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus additional amounts considered appropriate. Included in 2006 is our expected contribution of $3.0
million to the plan.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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On April 13, 2005, we announced a project to expand and modernize our Oro Grande, California cement
plant. We plan to expand the Oro Grande plant to approximately 2.3 million tons of advanced dry process cement production capacity annually, and retire the 1.3 million tons of existing, but less efficient, production after the new plant is
commissioned. We expect the Oro Grande project will take at least two years to construct and will cost approximately $358 million. We expect our capital expenditures in fiscal year 2006 including those related to the expansion and modernization of
our Oro Grande cement plant will be approximately $160 million.



We expect cash and cash equivalents, cash from operations, available borrowings under our senior secured revolving credit facility and available distributions from our investments in life insurance contracts to be sufficient to provide
funds for capital expenditure commitments (including the expansion and modernization or our Oro Grande, California cement plant), scheduled debt payments, working capital needs and other general corporate purposes for at least the next year.



Spin-off of Chaparral.We entered into a separation and
distribution agreement with Chaparral in which we each released the other from all liabilities existing or arising from all acts and events occurring before the spin-off regarding our respective businesses. The liabilities released or discharged do
not include liabilities arising under or assigned by the separation and distribution agreement or any ancillary agreement, such as tax liabilities and liabilities to third parties. In the separation and distribution agreement Chaparral assumed all
the liabilities related to the steel business and the transferred assets, and we and Chaparral agreed on the allocation of responsibility for certain employee benefits. The separation and distribution agreement also requires that each party
indemnify the other against certain liabilities. See Notes to Consolidated Financial Statements footnote entitled Legal Proceedings and Contingent Liabilities on page 16.



Cash Flows



Net cash provided by continuing operating activities was $14.4 million, compared to $22.4 million in the prior year period. The decrease resulted
primarily from changes in working capital items. Inventories increased $4.7 million due to lower cement shipments. Accounts payable and accrued expenses decreased $11.2 million due to the timing of interest and incentive compensation payments. Other
credits increased $5.0 million due to stock-based compensation accruals.



Net cash used for continuing investing activities was $8.9 million, compared to $59.0 million in the prior year period. Capital expenditures were $10.3 million, up $4.6 million from the prior year period. Expenditures
were primarily for normal replacement and technological upgrades of existing equipment and acquisitions to sustain our existing operations. In the prior year period we repaid distributions received from our investments in life insurance contracts in
the amount of $51.2 million.



Net cash used for continuing
financing activities was $450.9 million, compared to $1.2 million provided in the prior year period. We purchased $600 million of our old 10.25% senior notes, paying $96.0 million in make-whole premiums and consent payments plus transaction costs.
To fund the purchase we issued $250 million of our new 7.25% senior notes and incurred $7.1 million in debt issuance costs, received a cash dividend of $341.1 million from Chaparral and used $112 million of cash and cash equivalents on hand.



Net cash provided by discontinued operations was $331.4
million, compared to $22.4 million the prior year period. In connection with our refinancing and spin-off transactions Chaparral issued $300 million of senior notes and borrowed $50 million under its new $150 million credit facility. The net
proceeds were used to pay us a dividend of $341.1 million.



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OTHER ITEMS



Environmental Matters



We are subject to federal, state and local environmental laws and regulations concerning, among other matters, air emissions and wastewater discharge. We
believe we are in substantial compliance with applicable environmental laws and regulations; however, from time to time we receive claims from federal and state environmental regulatory agencies and entities asserting that we are or may be in
violation of certain environmental laws and regulations. Based on our experience and the information currently available to us, we believe that such claims will not have a material impact on our financial condition or results of operations. Despite
our compliance and experience, it is possible that we could be held liable for future charges which might be material but are not currently known or estimable. In addition, changes in federal or state laws, regulations or requirements or discovery
of currently unknown conditions could require additional expenditures by us.



Market Risk



Historically, we have not entered
into derivatives or other financial instruments for trading or speculative purposes. Because of the short duration our investments, changes in market interest rates would not have a significant impact on their fair value. We have $250 million of
$7.25% fixed-rate senior notes outstanding. The fair value of the debt will vary as interest rates change.



Our operations require large amounts of energy and are dependent upon energy sources, including electricity and fossil fuels. Prices for energy are
subject to market forces largely beyond our control. We have generally not entered into any long-term contracts to satisfy our fuel and electricity needs. If we are unable to meet our requirements for fuel and electricity, we may experience
interruptions in our production. Price increases or disruption of the uninterrupted supply of these products could adversely affect our results of operations.



Critical Accounting Policies



The preparation of financial statements and accompanying notes in conformity with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported. Changes in the facts and circumstances could have a significant impact on the resulting financial statements. The critical accounting policies that affect its more complex judgments and
estimates are described in our Annual Report on Form 10-K for the year ended May 31, 2005.



New Accounting Standards.In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS No. 123R,
Share-Based Payment. SFAS No. 123R is a revision of SFAS No. 123, Accounting for Stock Based Compensation, and supersedes APB 25. Among other items, SFAS 123R eliminates the use of APB 25 and the intrinsic value
method of accounting, and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. The current effective
date of SFAS 123R is the first fiscal year beginning after June 15, 2005, which will be the first quarter of our fiscal year ending May 31, 2007. We currently expect to adopt the SFAS 123R effective June 1, 2006 using the
modified prospective method. Under the modified prospective method, compensation cost is recognized in the financial statements beginning with the effective date, based on the requirements of SFAS 123R for all share-based payments
granted after that date, and based on the requirements of SFAS 123 for all unvested awards granted prior to the effective date of SFAS 123R. Financial information for periods prior to the date of adoption of SFAS 123R would not be restated. We
currently utilize a standard option pricing model (i.e., Black-Scholes) to measure the fair value of stock options granted to employees. While SFAS 123R permits entities to continue to use such a model, the standard also permits the use of a
lattice model. We have not yet determined which model we will use to measure the fair value of awards of equity instruments to employees upon the adoption of SFAS 123R.



The adoption of SFAS 123R will have a significant effect on our future results of operations. However, it will not have an
impact on our consolidated financial position. The impact of SFAS 123R on our results of operations cannot be predicted at this time, because it will depend on the number of equity awards granted in the future, as well as the model used to value the
awards. However, had we adopted the requirements of SFAS 123R in prior periods, the impact would have approximated the amounts disclosed in Summary of Significant Accounting Policies  Stock-based Compensation in the Notes to Consolidated
Financial Statements.



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SFAS 123R also requires that the benefits associated with the tax deductions in excess of recognized
compensation cost be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. This requirement will reduce net operating cash flows and increase net financing cash flows in periods after the
effective date. These future amounts cannot be estimated, because they depend on, among other things, when employees exercise stock options.



In December 2004, the FASB issued SFAS No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4, which will become effective
for the Company beginning June 1, 2006. This standard clarifies that abnormal amounts of idle facility expense, freight, handling costs and wasted material should be expensed as incurred and not included in overhead. In addition, this standard
requires that the allocation of fixed production overhead cost to inventory be based on the normal capacity of the production facilities. The Company is currently evaluating the potential impact of this standard on its financial position and results
of operations.



In May 2005, the FASB issued SFAS No. 154,
Accounting Changes and Error Corrections, which is effective for the Company for reporting changes in accounting principles beginning June 1, 2006. SFAS No. 154 modifies the reporting of a change in accounting principle to
require retrospective application to prior periods financial statements, unless explicit transition provisions are provided for in new accounting pronouncements or existing pronouncements that are in the transition phase when SFAS No. 154
becomes effective.



Cautionary Statement for Purposes of the Safe
Harbor Provisions of the Private Securities Litigation Reform Act of 1995



Certain statements contained in this quarterly report are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are subject to risks,
uncertainties and other factors, which could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. Potential risks and uncertainties include, but are not limited to, the impact of
competitive pressures and changing economic and financial conditions on our business, construction activity in the our markets, abnormal periods of inclement weather, unexpected periods of equipment downtime, changes in the cost of raw materials,
fuel and energy, and the impact of environmental laws and other regulations. For further information refer to our Annual Report on Form 10-K for the year ended May 31, 2005.



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Item 4. Controls and Procedures



The
Company maintains disclosure controls and procedures designed to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the
specified time periods. As of the end of the period covered by this Quarterly Report on Form 10-Q, the Companys Chief Executive Officer and Chief Financial Officer evaluated, with the participation of the Companys management, the
effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based on the evaluation, which disclosed no significant deficiencies or material weaknesses, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the Companys disclosure controls and procedures are effective. There were no significant changes in the Companys internal controls over financial reporting that occurred during
the Companys most recent fiscal quarter that have materially affected or are reasonably likely to materially affect the Companys internal control over financial reporting.



PART II. OTHER INFORMATION



Item 1. Legal Proceedings



The
information required by this item is included in the section of the Notes to Consolidated Financial Statements entitled Legal Proceedings and Contingent Liabilities presented in Part I on page 16 and incorporated herein by reference.



Item 6. Exhibits



The following
exhibits are included herein:



|       |  |                                                                  
|------ |  | -----------------------------------------------------------------
|(12.1) |  | Computation of Ratios of Earnings to Fixed Charges               
|       | 
|(15.1) |  | Letter re: Unaudited Interim Financial Information               
|       | 
|(31.1) |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer
|       | 
|(31.2) |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer
|       | 
|(32.1) |  | Section 1350 Certification of Chief Executive Officer            
|       | 
|(32.2) |  | Section 1350 Certification of Chief Financial Officer            



The remaining exhibits
have been omitted because they are not applicable or the information required therein is included elsewhere in the financial statements or notes thereto.



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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                |  |                                                               
|--------------- |  | --------------------------------------------------------------
|                |  | TEXAS INDUSTRIES, INC.                                        
|                | 
|October 7, 2005 |  | /s/ Richard M. Fowler                                         
|                |  | Richard M. Fowler                                             
|                |  | Executive Vice President - Finance and Chief Financial Officer
|                |  | (Principal Financial Officer)                                 
|                | 
|October 7, 2005 |  | /s/ James R. McCraw                                           
|                |  | James R. McCraw                                               
|                |  | Vice President  Accounting and Information Services          
|                |  | (Principal Accounting Officer)                                



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INDEX TO EXHIBITS



|         |  |                                                                   |  |     
|-------- |  | ----------------------------------------------------------------- |  | ----
|Exhibits |  |                                                                   |  | Page
|12.1     |  | Computation of Ratios of Earnings to Fixed Charges                |  |     
|         |  |                                                                  
|15.1     |  | Letter re: Unaudited Interim Financial Information                |  |     
|         |  |                                                                  
|31.1     |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |  |     
|         |  |                                                                  
|31.2     |  | Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |  |     
|         |  |                                                                  
|32.1     |  | Section 1350 Certification of Chief Executive Officer             |  |     
|         |  |                                                                  
|32.2     |  | Section 1350 Certification of Chief Financial Officer             |  |     



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